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Economic Systems

Economic Systems. Economic Systems. Example. Define. 1. Traditional Economy 2. Command Economy 3. Free Market Economy 4. Mixed Economy. Economic Systems. Learning Target: List the 3 economic questions. Compare and contrast the 3 economic systems. 3 economic questions.

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Economic Systems

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  1. Economic Systems

  2. Economic Systems Example Define • 1. Traditional Economy • 2. Command Economy • 3. Free Market Economy • 4. Mixed Economy

  3. Economic Systems Learning Target: List the 3 economic questions. Compare and contrast the 3 economic systems.

  4. 3 economic questions • What should we make? • How should we make it? • For whom should we make goods and services?

  5. Command Economies • Answers the 3 economic questions with: • What – military goods and FEW consumer goods • How – GOVERNMENT owns and makes everything • For whom – ALL people • Communism, Fascism, and most ancient societies are like this • Often dictators and disliked governments • Today: North Korea, Cuba, China (kinda)

  6. Command Economies • Problems: • Inefficient & wasteful • Slow to change and adapt • No incentives for workers • No freedom to purchase desired goods • Low standard of living (often poor) • Benefits: • Security – basics of food and housing provided • Equity – everyone receives very little equally – no super rich • Close communities and nations – work together more

  7. Market Economies • Answers the 3 economic questions with: • What – consumer goods • How – People and businesses own and make everything • For whom – people who can pay • Free enterprise economies = market economies • Businesses (enterprises) are FREE to sell what they want to sell • True market economy = FEW government rules on what can / cannot be made

  8. Free Market Economies • Problems: • No security b/c no job = no home or food • No government help to those who need it (elderly and disabled, for example) • No rules on businesses, so they become powerful, raise prices, & produce only profitable items • Benefits: • Low taxes • No waste & very efficient • Complete economic freedom

  9. Mixed Economies • Answers the 3 economic questions with: • What – military goods AND consumer goods • How – government, people, AND businesses • For whom – all people • Mixed = command + market economies • Best of both worlds or problems of both worlds? • Government provides for those who need help; MOST people buy what they need on their own

  10. Mixed Economies • Problems: • Higher taxes than market economy • Waste & cheating the system • Rich feel punished by taxes • Businesses are limited by the government • Benefits: • Government helps the needy • More economic security • Government protection of consumers

  11. Exit ticket: • On the back of your chart about the activity today, answer these 3 questions: • Why do you think command economies failed? (most have changed to a mixed economy now) • What do you think about taxes – is taxing set up right in our country? Who should pay more or less if you think it should be changed? • What do you think about government help to the needy – is the system set up correctly, or should there be more help or less help? Why?

  12. 6 Social Goals of each economic system • Learning Target: • Define each of the six social goals. • Compare and contrast social goals of market and command economies.

  13. 6 social goals • Economic Efficiency: producing cheaply & without waste • Economic equity: 2 kinds • Everyone earns according to his/her work Ex: lawyer earns more than security guard b/c lawyer has longer hours and harder brain job • Everyone earns equally according to ability Ex: lawyer and security guard paid same b/c working according to their abilities

  14. Continued social goals • Economic freedom: choice of where to work and what to buy • Economic growth: producing more goods and services each year & adding new jobs

  15. Continued social goals • Economic security: no fear of change (job loss, health problem, or old age) • Economic stability: prices staying about the same or changing slowly

  16. Matching social goals and types of economies • In a command economy: • Equity in everyone getting paid the same • Security in jobs • Stability in prices • NOT important in command: • Efficiency • Freedom • Growth • In a market economy: • Efficiency in production • Equity in everyone getting paid what they earn • Freedom in choices • Growth in economy • NOT important in market: • Security • Stability

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