Week 19 day 2- economic systems and 3 economic questions

1. Good Morning! Good Morning! 1/9/141/9/14
EQ: EQ: What are the different types of Economic systems?What are the different types of Economic systems?
HW: HW: * Get a composition notebook * Get a composition notebook
SPONGESPONGE
1.1.Pick up a graphic organizer and question strip from the BLUE Pick up a graphic organizer and question strip from the BLUE
and PURPLE Tray and and PURPLE Tray and
2.2.Update your TOCUpdate your TOC
3.3.Paste Paste Question strip Question strip to to page 5page 5
DateDate ## Title Title
1-9-144 Types of Econ System PPT Notes
1-9-145 Econ Question Strip

2. Economic Economic
SystemsSystems

3. Economic SystemsEconomic Systems
An An economic system economic system describes how a describes how a
country’s economy is organizedcountry’s economy is organized
Because of the problem of Because of the problem of scarcityscarcity, every , every
country needs a system to determine how to use country needs a system to determine how to use
its productive resourcesits productive resources
Scarcity = not having enough of somethingScarcity = not having enough of something
An economic system must answer 3 An economic system must answer 3
questions…questions…

4. The 3 Economic Questions (3E?’s)The 3 Economic Questions (3E?’s)
1.1.WHAT TO PRODUCE? WHAT TO PRODUCE? (What kinds of goods and (What kinds of goods and
services should be produced?)services should be produced?)
2.2.HOW TO PRODUCE? HOW TO PRODUCE? (What productive resources are (What productive resources are
used to produce goods and services?)used to produce goods and services?)
3.3.FOR WHOM TO PRODUCE? FOR WHOM TO PRODUCE? (Who gets to have the (Who gets to have the
goods and services?goods and services?

5. Three Types of Economic Three Types of Economic
Systems:Systems:
1. Traditional Economy1. Traditional Economy
2. Command Economy2. Command Economy
3. Market Economy3. Market Economy
* Most countries are… * Most countries are… Mixed EconomiesMixed Economies! !
(Market + Command)(Market + Command)

6. Traditional EconomyTraditional Economy
An economic system in which economic An economic system in which economic
decisions are decisions are based on customs and beliefsbased on customs and beliefs
People will make what they always made & People will make what they always made &
will do the same work their parents didwill do the same work their parents did
Exchange of goods is done through Exchange of goods is done through
BarteringBartering: trading without using money: trading without using money

7. How a Traditional Economy How a Traditional Economy
answers the 3E?’sanswers the 3E?’s
Who decides what to produce?Who decides what to produce?
People People follow their customs and make what follow their customs and make what
their ancestors madetheir ancestors made
Who decides how to produce goods & Who decides how to produce goods &
services?services?
People People grow & make things the same way that grow & make things the same way that
their ancestors didtheir ancestors did
Who are the goods & services produced Who are the goods & services produced
for?for?
People in the People in the village who need themvillage who need them

8. Traditional Economy Traditional Economy
Examples:Examples:
Villages in Africa and South America Villages in Africa and South America
the Inuit tribes in Canadathe Inuit tribes in Canada
the caste system in parts of rural Indiathe caste system in parts of rural India
the Aborigines in Australiathe Aborigines in Australia

9. Positives of a Positives of a
traditional economytraditional economy
PredictablePredictable
Knowing what your job willKnowing what your job will
be be
Knowing the way you willKnowing the way you will
live live

10. Problems with a Problems with a
traditional economytraditional economy
Lack many resourcesLack many resources
Only produce enough to Only produce enough to
live onlive on

11. Command SystemCommand System
Government makes all economic decisions Government makes all economic decisions & &
owns most of the propertyowns most of the property
Governmental planning groups determine such Governmental planning groups determine such
things as the prices of goods/services & the wages things as the prices of goods/services & the wages
of workersof workers
This system has not been very successful & more This system has not been very successful & more
and more countries are abandoning itand more countries are abandoning it

12. How a Command Economy How a Command Economy
answers the 3E?’sanswers the 3E?’s
Who decides what to produce?
Government makes all economic decisions
Who decides how to produce goods
and services?
Government decides how to make
goods/services
Who are the goods and services
produced for?
Whoever the government decides to give them
to

13. Command SystemCommand System
Countries with Countries with communist governments have communist governments have
Command economiesCommand economies
Examples: Examples: There are no truly pure command There are no truly pure command
economic systems, but close countries are: economic systems, but close countries are:
North Korea, former Soviet Union, CubaNorth Korea, former Soviet Union, Cuba
*Germany and Russia have moved away from *Germany and Russia have moved away from
having a Command economy since 1991. Now they having a Command economy since 1991. Now they
have a Mixed economy.have a Mixed economy.

14. Positives of a Positives of a
command economycommand economy
Because the government Because the government
makes the decisions, people makes the decisions, people
don’t have to worry about don’t have to worry about
employment, housing, employment, housing,
education, and healthcareeducation, and healthcare

15. Problems with a Problems with a
command economycommand economy
Consumers get lowConsumers get low
priority priority
Little freedom of choiceLittle freedom of choice
All resources are ownedAll resources are owned
by the government by the government

16. Market EconomyMarket Economy
An economic system in which production An economic system in which production
and distribution questions are answered by and distribution questions are answered by
prices and profits (supply and demand)prices and profits (supply and demand)
Most of the resources are owned by private Most of the resources are owned by private
citizenscitizens
Economic Economic decisions are based on decisions are based on Free Free
EnterpriseEnterprise (competition between (competition between
companies)companies)
Important economic questions are not answered Important economic questions are not answered
by gov. but by individualsby gov. but by individuals
Gov. does not tell a business what goods to Gov. does not tell a business what goods to
produce or what price to chargeproduce or what price to charge

17. How a Market Economy answers How a Market Economy answers
the 3E?’sthe 3E?’s
Who decides what to produce?
Businesses base decisions on supply and demand
and free enterprise (PRICE)
Who decides how to produce goods
and services?
Businesses decide how to produce goods
Who are the goods and services
produced for?
consumers

18. Market EconomyMarket Economy
There are There are no truly pure Market economiesno truly pure Market economies, ,
but the United States is close.but the United States is close.

19. In a truly free market economy, the In a truly free market economy, the
government would not be involved at allgovernment would not be involved at all
There would be There would be no laws to protect workers no laws to protect workers form form
unfair bossesunfair bosses
There would be There would be no rulesno rules to make sure that to make sure that
credit cards were properly protectedcredit cards were properly protected
Many societies have chosen to have some Many societies have chosen to have some
rules to protect consumers, workers, and rules to protect consumers, workers, and
businesses (businesses (MIXEDMIXED))
These rules reduce the freedoms that businesses These rules reduce the freedoms that businesses
have, but they also protect the workers and have, but they also protect the workers and
consumersconsumers

20. Positives of a Positives of a
market economymarket economy
People can start their own People can start their own
businessesbusinesses
 People have choicePeople have choice

21. Problems with a Problems with a
market economymarket economy
The desire for money may The desire for money may
lead to poor quality of lead to poor quality of
goods and servicesgoods and services
Business owners have to Business owners have to
risk losing moneyrisk losing money

22. Mixed EconomyMixed Economy
Market + Command = MixedMarket + Command = Mixed
Businesses own most resources and determine Businesses own most resources and determine
what and how to produce, but the what and how to produce, but the
government regulates certain industriesgovernment regulates certain industries
There are no pure command or market There are no pure command or market
economies. economies.
To some degree, all modern economies exhibit To some degree, all modern economies exhibit
characteristics of both systems and are often characteristics of both systems and are often
referred to as mixed economies. referred to as mixed economies.
Most economies are closer to one type of economic Most economies are closer to one type of economic
system than anothersystem than another

23. How a Mixed Economy answers How a Mixed Economy answers
the 3E?’sthe 3E?’s
Who decides what to produce?Who decides what to produce?
businessesbusinesses
Who decides how to produce goods and Who decides how to produce goods and
services?services?
Businesses, but the government regulates Businesses, but the government regulates
certain industriescertain industries
Who are the goods and services produced Who are the goods and services produced
for?for?
consumersconsumers

24. Mixed EconomiesMixed Economies
Most democratic countries fall in this Most democratic countries fall in this
categorycategory (there are no truly pure Market or (there are no truly pure Market or
Command economies).Command economies).
Examples: Examples: Brazil, Mexico, Canada, UK, US, Brazil, Mexico, Canada, UK, US,
Germany, Russia, Australia, etc.Germany, Russia, Australia, etc.

25. Continuum of EconomiesContinuum of Economies
Most
Individual
freedom
No
Individual
freedom
Pure
Market
Pure
Command
Most economies fall in between a pure
market and a pure command economy
on the continuum

26. Economy ContinuumEconomy Continuum
Command Market
Cuba Russia
Germany
US
Australia
UK

27. Which Economic System Is Best?Which Economic System Is Best?
Market system has proven to be best Market system has proven to be best
because it promotes the goals of growth, because it promotes the goals of growth,
freedom, & efficiencyfreedom, & efficiency
Citizens are free to own their own property and Citizens are free to own their own property and
use it in the most efficient and profitable wayuse it in the most efficient and profitable way
Command and Traditional systems Command and Traditional systems
sometimes offer more security, but are not sometimes offer more security, but are not
nearly as strong in efficiency, growth, nearly as strong in efficiency, growth,
freedom, and environmental qualityfreedom, and environmental quality

28. DirectionsDirections
Complete the Positives and Weaknesses of Complete the Positives and Weaknesses of
each Econ System using your resourceseach Econ System using your resources
Answer your Question Strip questions. Answer your Question Strip questions.
Complete for HW (Page 5) Complete for HW (Page 5) if you do not if you do not
finish in class. finish in class.
Finish Vocab Finish Vocab