Economic Decision-Making

1. Aim: How can we compare the differences between the economies of countries around the world?Objective: SWBAT analyze the different economies of the world.Do Now: Discuss the economic strategies of your household income based on monthly needs?

2. Economic Decision-Making The six steps in the economic decision- making process are: • Defining the problem • Identifying choices • Evaluating the advantages and disadvantages of each choice • Choosing one choice • Acting on the choice • Reviewing the decision

3. Economic Systems • All nations face the basic economic problem of scarcity of resources. • An economic system is a nation’s plan for how their available resources will be used to meet the needs and wants of its citizens. • The main types of economic systems are: • Command: Communism • Market: Capitalism • Traditional: Traditionalism • Mixed: Socialism

4. Economic Systems • Each nation’s economic system answers 3 main questions: • What goods and services will be produced? • How will those goods and services be produced? • For whom will goods and services be produced?

5. Economic Systems Command Economy: Communism • An economics system in which the government owns resources and dictates what is produced • Who answers the 3 economic questions? • The government • Examples: Cuba, North Korea

6. Economic Systems Market Economy: Capitalism • An economics system where goods and services are owned and controlled by the people of the country. • Who answers the 3 economic questions? • Individuals through buying and selling of goods and services in the marketplace(anywhere that goods and services are exchanged) • Examples: United States, Japan

7. Economic Systems Traditional Economy: Traditionalism • An economic system in which goods & services are produced the way they always have been (customs) & centered on meeting the basic needs of each family • Who answers the 3 economic questions? • Each family • Examples: Third world countries in South America and Africa

8. Economic Systems Mixed Economy: Socialism • Combines the elements of the command and market economies. • Varying degrees of government involvement in the marketplace • China, Canada, France

9. The United States Economic System • Businesses and individuals answer the 3 major economic questions, so it is considered a market economy. • Other concepts of the U.S. economy • Capitalism:Refers to the private ownership of resources by individuals rather than the government • Free enterprise or private enterprise: Businesses can decide what to produce and consumers can decide what to purchase

10. The Principles of the U.S. Economic System • Private property– We can own, use, or dispose of things of value • Freedom of choice– We can make decisions independently but we must accept consequences of those decisions. (The government only regulates choice when individual decisions may harm others.) • Profit – money left from sales after all of the costs of operating a business have been paid. • To make a profit is the reason people and businesses take risks! • Competition – the rivalry among businesses to sell their goods and services. • Competition forces businesses to keep costs low, provide good customers service and search for new ideas.

11. Supply and Demand Consumers: buy and use goods and services include individuals, businesses, and government. Consumers decide: what to buy, where to buy, and from whom to buy what price they are willing to pay.

12. Supply and Demand Producers: individuals and organizations that determine what products and services will be available for sale invest resources and take risks to make a profit

13. Supply and Demand The market economy is based on the principles of supply and demand. Demand: the quantity of goods or services that consumers are willing and able to buy. Consumers set the demand for goods and services. Demand influences how much producers will supply. Examples: iPods, a restaurant that sells good food at a low price

14. Supply and Demand The market economy is based on the principles of supply and demand. Supplyrefers to the quantity of goods or services that businesses are willing and able to provide. Producers establish the quantity of goods or services that will be produced to meet the demands of consumers. Example: If people really want a product and are willing to pay a high price for it, a business will make enough to meet the consumers’ needs. If there is heavy competition and a low price, businesses are less likely to want to offer the product for sale.

15. Supply and Demand Graphs Market (equilibrium) priceis the point where supply and demand are equal. Consumers are satisfied with the price they have to pay Businesses are satisfied with the profit they are making

16. Task: You are to choose an economic system for your Nation, • Base your economic system on Population, Resources, and location. • Answer the 3 main questions of an economic system. • Analyze your natural resources to create products. • Explain why your economic system would benefit your nation.