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Economic Systems

Economic Systems. In this lesson, students will examine the four economic systems. Bell Ringer: Define the following terms- Economic System Market Traditional Economy Market Economy Command Economy Mixed Economy. What goods and services will a country produce?.

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Economic Systems

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  1. Economic Systems In this lesson, students will examine the four economic systems. Bell Ringer: Define the following terms- Economic System Market Traditional Economy Market Economy Command Economy Mixed Economy E. Napp/Helf

  2. What goods and services will a country produce? E. Napp

  3. An Economic System • AN ECONOMIC SYSTEM IS A METHOD USED BY A SOCIETY TO PRODUCE AND DISTRIBUTE GOODS AND SERVICES. • The key questions addressed by each: • What goods and services will be produced? • How will these goods/services be produced? • How much? • Who will consume these goods/services? • Individual markets CAN be described using the categories, but it is mostly countries E. Napp/Helf

  4. Who will consume these goods? That is a key economic question. E. Napp

  5. Nations answer those key questions differently. E. Napp

  6. A Traditional Economy • PEOPLE LIVE AND WORK AS THEIR ANCESTORS LIVED AND WORKED. In a traditional economy, we produce what our ancestors produced, produce it the way our ancestors did, distribute it the way our ancestors did. E. Napp/Helf

  7. It’s all about the ancestors. Traditional economies do not encourage change. E. Napp/Helf

  8. A Traditional Economy • Advantages? • Disadvantages? Helf

  9. A Traditional Economy • ADVANTAGES • STABLE, VERY LITTLE UNCERTAINTY • FULL EMPLOYMENT (mostly) • FAIRLY EQUAL ECONOMICALLY • DISADVANTAGES • SSLLLOOOOWWWWW TO CHANGE • LITTLE SPECIALIZATION • LOWER PRODUCTIVITY Helf

  10. A Market Economy • PEOPLE ARE FREE TO BUY AND SELL WHATEVER MONEY ALLOWS. • GOVERNMENT DOES NOT INTERFERE (or at least shouldn’t) • The individual has complete economic freedom. E. Napp/Helf

  11. In a free market, individuals are free to buy and sell. E. Napp

  12. A Market Economy • Advantages? • Disadvantages? Helf

  13. A Market Economy • ADVANTAGES • QUICK TO ADAPT • COMPLETE ECONOMIC MOBILITY • EMPHASIZES EFFICIENCY • DISADVANTAGES • NO SAFETY NET • ABUSES OF POWER: CONCENTRATION OF WEALTH • TECHNOLOGICAL UNEMPLOYMENT Helf

  14. Command Economy • THE GOVERNMENT MAKES ALL ECONOMIC DECISIONS. • The government determines production, determines compensation, provides for all needs and owns all production. • Karl Marx advocated a centrally planned economy. E. Napp/Helf

  15. Communists advocate command economy. “Pure” democracy: the people ARE the Government E. Napp/Helf

  16. Command Economy • Advantages? • Disadvantages? Helf

  17. Command Economy • ADVANTAGES • ECONOMIC EQUALITY (in theory) • FULL EMPLOYMENT • AUTOMATIC SAFETY NET • DISADVANTAGES • NO INCENTIVE FOR EFFICIENCY • ABUSES OF POWER: NOT ALL PIGS ARE EQUAL • SLOW TO ADAPT; POLITICAL HACKTIVISM Helf

  18. A Mixed Economy • COMBINES ELEMENTS OF THE OTHER THREE ECONOMIC SYSTEMS • Most modern nations are mixed • Nations mix their systems different: • Social democracies > Command economies E. Napp/Helf

  19. Questions for Reflection: • Define an economic system. • What are the three key economic questions? • Describe life in a traditional economy. • Describe life in a free market economy. • How does a centrally planned economy differ from a free market economy? • Why do modern nations prefer mixed economies? E. Napp

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