Economics Systems

1. Economics Systems Ms. Coker

2. Why do we study economics? • The fundamental economic problem in any society is to provide a set of rules for allocating resources and/or consumption among individuals who can't satisfy their wants, given limited resources.

3. 3 Basic Economic Questions • In every nation, no matter what the form of government, what the type of economic system, who controls the government, or how rich or poor the country is, three basic economic questions must be answered.

4. On the Page 16 of your interactive notebook draw this concept map, leave room for details How will it be produced? What and How Much will be produced? Economics Questions For whom will it be produced?

5. What and how much will be produced? • Literally, billions of different outputs could be produced with society's scarce resources. (Scarcity- In economics, scarcity is the problem of infinite human needs and wants, in a world of finite resources. In other words, society does not have sufficient productive resources to fulfill those wants and needs

6. How will it be produced? • There are many ways to produce a desired item. It may be possible to use more labor and less capital, or vice versa. It may be possible to use more unskilled labor to substitute for fewer units of skilled labor.

7. For whom will it be produced? • Once a commodity is produced, some mechanism must exist that distributes finished products to the ultimate consumers of the product. The mechanism of distribution for these commodities differs by economic system.

8. While there are many terms that are used to describe the types of economies that exist in the world, most economists agree that there are four major types of economic systems.

9. On the Page 17 of your interactive notebook draw this chart, take up the whole page and leave room for details!

10. Market economy • An economic system in which individuals own and operate the factors of production. • AKA: Free enterprise, Capitalism • United States, Great Britain, Japan

11. Command economy • An economic system in which the government owns and operates the factors of production. • AKA: Socialism, Communism • Cuba, China, Laos

12. Traditional economy • An economic system based upon customs and traditions. Economy is based upon agriculture and hunting. • AKA: Non-Industrialized, Agrarian societies • Chad, Haiti, Rwanda

13. Mixed economy • An economic system that has features of both market and command economies.

14. In reality there are no pure market economies, nor are there any pure command economies. For example, even in the United States, where free enterprise reigns, the government plays a major role in the economy. Minimum wages, social security, and regulatory policies are examples of government involvement. • In China, for example, some private ownership of businesses is allowed, however the government still maintains tight control over the factors of production and prices. • While we could say that both the United States and China are mixed economies because they contain both market and command economic features, to do so would be misleading because the role that the respective governments play in the economy are quite different.