Economic Systems

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Economic Systems

• How the Government influences how I make money.

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Quick Review

• What are Goods?
• What are Services?
• What are Resources?
• What is Scarcity?

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Economic Systems

• Def. The method used by a society to produce and
  distribute goods and services.
• Or, How the government tells us what we can get
  and how to get it!

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All Economic Systems Must Consider the Following
Questions

• What goods and services to produce?
• How will they produce them?
• Who will get them?
• How much will they produce now, and how much
  later?
• For Whom to produce for?
• Each economic system answers these questions in a
  DIFFERENT WAY.

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Types of Economic Systems

• There are 3 basic types of economic systems.

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1. Traditional Economy

• Economic questions are answered by habits and
  customs (the way it has always been done, do what
  ancestors did.)
• Children work the same jobs parents worked, often
  farming or hunter/gatherer
• Ex. Eskimos, the Amish,
• , Bush People

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2. Command Economy

• The government answers the basic economic
  questions
• Advantages able to act quickly in emergencies,
  provide for all people equally
• Disadvantages Inefficient, no incentive to work
  hard or be creative
• Ex. Communist Countries (China, Vietnam, North
  Korea, former
• Soviet Union, Cuba)

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3. Free Market Economy

• Economic questions are answered by individual
  buyers and sellers.
• Supply and demand influence economy
• People act out of self interest motive for
  profit (money) drives the economy
• Also known as FREE ENTERPRISE or CAPITALISM
• Ex. The United States, Western
• Europe, Japan

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4. Mixed Economy

• Mixed Economy No economy is pure market, pure
  command or pure traditional, elements of each
  appear in all economies, some have more elements
  of one economy than another.
• Market Mixed Command
• USA Great Britain China

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Can you identify the economic System?

• My name is Heraldo Esterez. I have lived in Cuba
  all my life. I wanted to become a teacher.
  However , I work for a large sugar producer that
  is owned by the government. The government
  decides when I work, where I work, and how much
  money I receive. What economic system am I
  describing?
• Command Economy

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Identify Economic Systems

• My name is Curt Jones and I have always had a
  passion for delicious ice cream. I discovered a
  way to freeze ice cream into small dots. I
  patented the process for making the ice cream and
  built a plant to make enough ice cream to sell it
  internationally. Which economic system am I
  describing?
• Market Economy

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Identify Economic Systems

• My name is Mr. Jones and I have always had a
  passion for delicious ice cream. I discovered a
  way to make ice cream that formed tiny dots. I
  patented the process for making the ice cream and
  built a plant to make enough ice cream to sell
  internationally. I decided to build Kiosks,
  carts to store and sell ice cream, to dealers
  nationally and internationally. The Kentucky
  Health Department told me that each Kiosk that
  stays in Kentucky must have three sinks. The
  Health Department in California requires that all
  the Kiosks have four sinks in them. Which
  economic system am I describing?
• Mixed Economy

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Identify Economic Systems

• I am a basket maker in India. The people in my
  village make beautiful baskets. My grandmother
  and my mother made baskets. What type of
  economic system am I describing?
• Traditional Economy
• My name is Whitney Smith. I own a toy factory.
  My employees use many sharp instruments to make
  the toys. A federal agency called O.S.H.A.
  (Occupational Health and Safety Administration)
  visits my factory often to make sure my employees
  have the safe equipment to use. Which economic
  system am I describing?
• Mixed (Free Market Command)

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Identify Economic Systems

• My name is Derek Jones. I am an engineer. My
  father and grandfather are engineers also. Which
  economic system am I describing?
• Traditional Economy
• My name is Madison Brown. I worked for an ice
  cream company for many years. I am now 65 years
  old and have health problems that prevent me from
  working. I receive a Social Security check each
  month to help pay my expenses. What economic
  system am I describing?
• Mixed Economy