1 / 19

Economic Systems

Economic Systems. What is an economic system?. An organized way of providing for the wants and needs of the people . The way a society answers the three basic economic questions determines the type of economic system it has. Traditional Economy.

rbroadway
Download Presentation

Economic Systems

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Economic Systems

  2. What is an economic system? • An organized way of providing for the wants and needs of the people. • The way a society answers the three basic economic questions determines the type of economic system it has.

  3. Traditional Economy • Answers to basic questions come from custom, religion, ritual. • Examples : African Mbuti, Australian Aborigines, Inuits of Canada.

  4. Advantages/Disadvantages of Traditional System *Advantages : everyone knows what role to play; little uncertainty exists. *Disadvantages : discourages new ideas, lack of progress, lower standard of living.

  5. Command Economy • Basic questions are answered by a central government. • Examples : North Korea, Cuba

  6. Advantages/Disadvantages of a command economy • Advantages : can change drastically in a short time; many services offered at little or no cost. • Disadvantages : does not meet needs of people; no incentives; large bureaucracy; new ideas discouraged.

  7. Market Economy • Basic questions are answered by people and firms acting in their own best interests. • Examples : United States, Canada, Japan, Singapore

  8. Advantages/Disadvantages of the Market System • Advantages : can adjust to change gradually; individual freedom; variety of goods/services; lack of government interference. • Disadvantages : rewards only productive resources; basic needs not met for everyone; some uncertainty.

  9. Evaluating Economic Performance Economic and Social Goals

  10. Economic Efficiency • How well scarce resources are used; keep production costs as low as possible.

  11. Economic Equity • Fair • Distribution of income and wealth • Equal opportunity Plaintiffs in class-action suit against WalMart

  12. Economic Freedom • Freedom for • Consumers • Workers • individuals

  13. Economic Growth *Increasing the production of goods and services over time (GDP growth)

  14. Economic Security • Protect consumers, producers, and resources from risks that exist in society (recession, injury, unemployment, etc.)

  15. Economic Stability • Maintain stable prices • Full employment

  16. Trade-offs among goals • Sometimes there is conflict between goals. • Example : raising the minimum wage Equity v. price stability

  17. Which goals would be served?Which goals restricted? A 10% tax is placed on the use of tanning booths. Now Snooks has to spray-tan. New rules for unemployment benefits limit the length of time individuals can receive unemployment checks.

  18. Capitalism and Economic Freedom • A free enterprise economy has five main characteristics: • Economic freedom • Voluntary exchange • Private property rights • Profit motive (incentives) • Competition

  19. The economic system of the U.S. • In the United States, our economic system is -primarily a market system…. …with some elements of tradition… …and some elements of command… …so it is more accurately called a mixed market economy, or modified free enterprise economy.

More Related