Economic%20Systems

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Economic Systems
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Economic Systems

• Define

• Example

• 1. Traditional Economy
• 2. Command Economy
• 3. Free Market Economy
• 4. Mixed Economy

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Economic Systems

• Learning Target
• List the 3 economic questions.
• Compare and contrast the 3 economic systems.

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3 economic questions

• What should we make?
• How should we make it?
• For whom should we make goods and services?

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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)

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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

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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

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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

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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

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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

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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?

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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.

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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

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Continued social goals

1. Economic freedom choice of where to work and
   what to buy
2. Economic growth producing more goods and
   services each year adding new jobs

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Continued social goals

1. Economic security no fear of change (job loss,
   health problem, or old age)
2. Economic stability prices staying about the same
   or changing slowly

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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