Georgia Performance Standard and Essential Question

1. Georgia Performance Standard and Essential Question SS7E1,5,7 The student will analyze different economic systems. a. Compare how traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce. b. Explain how most countries have a mixed economy located on a continuum between pure market and pure command. EQ: 1. How do the traditional, command, and market economies of Southwest Asia countries answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce? 2. Where are the economic systems of Southwest Asia located on a continuum between pure market and pure command?

2. Economic Systems • When deciding how to use it’s limited resources, every country answers 3 questions about production and distribution • What will be produced? • How will it be produced? • For whom will it be produced? • How a country answers these questions depends on the type of economic system they have.

3. Four types of Economic Systems Traditional Economy Command Economy Market Economy Mixed Economy

4. Traditional Economy Overview • Based on customs and traditions of a country. Economy is based on farming and hunting. • People will make what they always make; they will do the same work their parents did. • Examples: Some parts of Africa, India

5. Traditional Economy • What to produce? • What people need to survive. • How to produce it? • Hunting, farming, gathering (social roles determine who does what) • For whom to produce? • Make their own products (what they have always made)

6. Characteristics of Traditional • Found in rural, non-developed countries (some parts of Asia, South America, and Africa) • Customs govern the economic decisions • Technology not used

7. Characteristics of Traditional • Farming, hunting, and gathering are done the same way as the generation before • Activities are centered toward the family or ethnic unit • Men and women have different economic roles and tasks

8. Command Economy Overview • Government owns and operates the factors of production. • The government would decide who would be farmers, what they would grow, and how much would be turned over to the government. • Also called Socialism, communism • Examples: North Korea, former Soviet Union, Cuba

9. Command Economy • What to produce? • Whatever the government decides • How to produce it? • However the government decides • For whom to produce? • Class reward system; waiting in line/rations

10. Characteristics of Command • Government or other central authority makes decisions about and determines how natural, capital, and human resources will be used. • Change can occur easily, because its government driven • Little individual freedom • No competition between businesses

11. Characteristics of Command • Business are not run to create a profit • Consumers have few choices in the market • Factories are concerned about meeting quotas (not profit)

12. Characteristics of Command • Shortages often occur because of poorly run factories and farms • Government determines your job • Government sets the price of goods and services

13. Market Economy Overview • Individuals own and operate the buildings, machinery, property of production. • Production and distribution questions are answered by prices and profits. • Businesses will make products, and provide services that will earn a profit. • Standard of living is higher in this system. • Prices of goods depend on how much is available and how many people want it. • Examples: US, Great Britain, Japan

14. Market Economy • What to produce? • What people want to buy and sell • How to produce it? • Supply and demand • For whom to produce? • Determined by how much someone is willing to pay for it

15. Market Economy Characteristics • Resources (capital and natural) are owned by individuals • Economic decisions are made by individuals competing to earn a profit • Individual freedom is considered very important

16. Market Economy Characteristics • Based on supply and demand (if people are willing to buy it, then businesses will make it) • Profit is the motive for increased work rather than quotas • Competition between businesses • Many economic freedoms and choice in the market place

17. Market Economy Characteristics • Competition determines prices which increase the quality of the product (you want to make the best and most inexpensive product, so consumers will buy your product instead of your competitor’s product) • No government intervention in the economy • ALSO CALLED CAPITALIST ECONOMY

18. Mixed Economy • Individuals own most resources and determine what and how to produce. • Government regulates certain industries. • Has features of both market and command economies. • Example: China, most nations • The US has a market economy but the government still has control over wages, social security and some policies.

19. Most Countries….. • Most countries have a mixed economy where they sway back and forth between a pure market and pure command economy. • A pure market is an economy in which pure competition prevails. – NO GOVERNMENT INTERVENTION • A pure command is an economy in which the government makes all decisions. – NO FREEDOM = COMPLETE GOVERNMENT CONTROL

20. ECONOMIC FREEDOM CONTINUUM 66.1-Israel PURE MARKET PURE COMMAND 60.8 Turkey 0 100 10 80 90 50 30 60 20 40 70 Free Repressed 52.8- Saudi Arabia

21. Economic System in Israel? • agriculture, fishing, and mining (diamonds) • manufacturing (metal products, electronic and biomedical equipment, processed foods, chemicals, and transport equipment) • FYI: Relatively poor in natural resources, depends on imports of petroleum, coal, food, uncut diamonds and total reliance on energy imports Israel has a Mixed Economy.

22. Economic System in Saudi Arabia? • Oil-based economy with strong government control over major economic activities. • FYI: Possesses 25% of the world's petroleum reserves and ranks as the largest exporter of petroleum. • The King and his advisors make most of the decisions about how and where to produce oil profits. Saudi Arabia has a Mixed Economy.

23. Economic System in Turkey? • Turkey has the least economic freedom of the three other countries. • Industries (airlines, railroads, telephone, and television) are controlled by the government. • Recently, the government has been allowing more private ownership and more laws have been passed to protect business owners. Turkey has a Mixed Economy.

24. Economic System in Iran? • Great oil wealth, but many Iranians do not share in the money. • Government attempts to keep tighter control. • Command economy not efficient. Iran has a Mixed Economy.

25. SS7E1: The student will analyze different economic systems. • c. Compare and contrast the economic systems in South Africa and Nigeria.

26. ECONOMIC CONTINUUM Where do the economies of South Africa and Nigeria fall on an economic continuum? ? ? PURE COMMAND ECONOMY MIXED ECONOMY PURE MARKET ECONOMY

27. ECONOMIC CONTINUUM Where do the economies of South Africa and Nigeria fall on an economic continuum? NIGERIA South Africa PURE COMMAND ECONOMY MIXED ECONOMY PURE MARKET ECONOMY

28. South African Economy

29. Nigerian Economy

30. NIGERIA • NATURAL RESOURCES • HIGH UNEMPLOYMENT • PAST CONFLICTS Economic Systems SOUTH AFRICA MIXED with more of a MARKET ECONOMY Natural Resources Gold and Diamonds GOV’T CONTROLS BASIC SERVICES MODERN INFRASTRUCTURE MODERATE ENTREPRENEURSHIP APARTHEID STRUGGLES COMMERCIAL FARMING • MIXED with elements of COMMAND and MARKET ECONOMIES • Oil and Natural Gas Resources • GOV’T CONTROLS OIL INDUSTRY AND OTHER SERVICES • SUBSISTENCE FARMING • POOR INFRASTRUCTURE • GOV’T INSTABILITY (Civil War and Corruption) • LIMITED ENTREPRENEURSHIP

31. Capital Investments and GDP • South Africa • Nigeria • South Africa is an example of a country that has invested in capital goods. • The equipment needed to get gold, diamonds, and platinum from deep in the earth required both investment in machinery and in worker training. • The same is true for South Africa’s iron and steel production and assembling automobiles and trucks. • Nigeria has invested heavily in capital goods for its oil industry. • New technology is required in order to compete in the global oil market. • The concentration on capital goods for this segment of the economy, however, has left many Nigerians without proper food or housing.

32. Uranium and Oil Uranium: • Uranium is an element that is an essential part of nuclear weapons. • For that reason, there has been a brisk undercover trade in uranium between countries. • Uranium is also used as a fuel component in nuclear power plants and to determine the age of artifacts. • It is even used in some photographic chemicals. • Africa currently supplies about 20% of the world’s uranium. Oil: • Another of Africa’s natural resources is oil. • Some researchers estimate that about 30% of newly discovered oil deposits in the world today are going to come from Africa. • Most of the know reserves are in African countries along the Mediterranean coast. • Oil reserves should guarantee a country economical prosperity. However, this has not been the case in Sub-Saharan Africa. • Profits from oil sales often go into the pockets of corrupt politicians and businessmen.

33. Gold and Diamonds • The discovery of gold and diamonds in Africa has been a mixed blessing. In some areas, the wealth from diamond mining has been used for the good of the country. • The dominate diamond company in South Africa is DeBeers. They regulate trade and the country is enjoying the benefits. Despite this, there is still a great deal of poverty in South Africa. • In other African countries, diamond wealth has led to chaos. Stolen or smuggled diamonds have been sold on the world market to provide money for weapons for soldiers in a number of different wars and conflicts. This trade is called “conflict diamonds” and has been a major provider of the money needed for arms and ammunition. • South Africa has lead the African nations in the mining and sale of gold. South Africa is believed to have approximately 40% of the world’s gold. The South African government has been able to use much of the gold profit to improve the country and help its people.

34. Entrepreneurs in Africa • Entrepreneurs are creative, original thinkers who are willing to take risks to create new businesses and products. • Many of the nations on the continent of Africa are ready for development, and many African governments want to do whatever they can to encourage bold and innovative business people.

35. The Economy of China • The Great Leap Forward and the Cultural Revolution- started to improve China’s economy. • New approach to all aspects of life. • Today China’s economy is growing strong. • Half on China’s workers are still in agriculture.

36. The Economy of India • Green Revolution-New types of seeds and grains introduced. Fertilizer and pesticides made available. • Became a source of pollution of the rivers and streams. • Technology and service industry helping to grow the middle class.

37. The Economy of Japan • One of the most technologically advanced economies in the world. • Very little natural resources • Most highly educated populations in the world. • Ministry of International Trade and Industry (MITI) decides what will sell best on the global market.

38. The Economy of North Korea • Democratic People’s Republic of North Korea (Kim Jong-il) • Government controls everything. (ex. Land, factories, jobs) • Country would not take help from western countries. Many people starved. • Economy suffering. Too much military spending

39. Exchange Rate

40. Economic Systems 0 100 Pure Command Mixed Economy Pure Market Iran 45% Saudi Arabia 64% Israel 68% Nigeria 55% South Africa North Korea 2% India 54% Japan 73% China 53%