Economic Systems and Other Key Concepts in Economics.pptx

Economic Systems

1. Economic systems and other key concepts in economics

2. E conomic systems 2 Market system All resources are owned by private entities Exchange of goods and services is what takes place Production is based on demand Price mechanism C ommand/planned sytem All resources are owned by the government Government is the central decision-making authority China and USSR Traditional system Normally observed and practiced in indigenous communities Self-reliant communities Young people followed the footsteps of their ancestors in the choice of occupations M ixed system Both capitalism and social economists are found Operates on the concept of mutual benefit

3. Economic Development is the sustained elevation of an entire society and social system toward a better and more humane life 3 Sustenance Ensuring that society is able to provide for basic needs Self-esteem Self-respect, reputation , pride and acknowledgement Freedom Providing for a wide variety of choices for societies as well as minimizing external limitations

4. ASSUMPTIONS AND FALLACIES IN ECONOMICS 4

5. 5 ASSUMPTIONS Rationality Profit Maximization Perfect Information Ceteris Paribus (All Things Equal) FALLACIES Failure to apply ceteris paribus Post hoc fallacy Fallacy of composition

6. Comparative advantage I t is most advantageous for economies to specialize in industries where they enjoy an advantage in resources and production processes 6

7. 7 International trade Nations can benefit from the exchange of products and resouces in an interconnected global economy

8. 8 Production possibilities frontier ( ppf ) A graph that shows the greatest sum of output given accessible resources It is used to show the possible combinations of two alternative products, assuming that the same resources are used for production