bell ringer do all countries have the same economic needs/goals?

Bell RingerBell Ringer

Do all countries have the same economic needs/goals?

Do all countries have the same economic needs/goals?

Economic Systems and the American EconomyEconomic Systems and the American EconomyChapter 2Chapter 2

Economic SystemsEconomic Systems

Your goals in life are very different from a teenager who lives in North KoreaThe reason for this is because you

live in a different economic systemEconomic System: the way of

determining how to use resources to satisfy people’s wants and needs

Your goals in life are very different from a teenager who lives in North KoreaThe reason for this is because you

live in a different economic systemEconomic System: the way of

determining how to use resources to satisfy people’s wants and needs


When deciding how to use their resources every economic system must answer three questions:1. What should be produced?

I-Pods versus Macbooks Guns versus Butter

2. How should it be produced? Skilled or unskilled labor Quality versus Quantity

3. For whom should it be produced? Lottery, first-come-first-serve, sharing

equally, military force, or individual choice Which of these is the American way?

When deciding how to use their resources every economic system must answer three questions:1. What should be produced?

I-Pods versus Macbooks Guns versus Butter

2. How should it be produced? Skilled or unskilled labor Quality versus Quantity

3. For whom should it be produced? Lottery, first-come-first-serve, sharing

equally, military force, or individual choice Which of these is the American way?


There are four types of economic systems:TraditionalCommand (Controlled, Communist)Market (Capitalist)Mixed

Can you guess which system is America’s system?NOTE: No “pure” system exists

There are four types of economic systems:TraditionalCommand (Controlled, Communist)Market (Capitalist)Mixed

Can you guess which system is America’s system?NOTE: No “pure” system exists


In a traditional economy the answer to the three questions is “the way it has always been done” Economic decisions are based on traditions,

customs, and religious beliefs In this system, you would be the same

profession as your father (women are typically housewives) and do it the same way he did

Advantage: you know what is expected of you; family ties/values are strong

Disadvantage: change is discouraged/punished, methods of production are inefficient, choice is rare

Where to find: Inuit tribes, Aborigines in Australia

In a traditional economy the answer to the three questions is “the way it has always been done” Economic decisions are based on traditions,

customs, and religious beliefs In this system, you would be the same

profession as your father (women are typically housewives) and do it the same way he did

Advantage: you know what is expected of you; family ties/values are strong

Disadvantage: change is discouraged/punished, methods of production are inefficient, choice is rare

Where to find: Inuit tribes, Aborigines in Australia


In a command economy the individual has little influence over the three questionsThe Government leaders control the factors

of production, and therefore the decisions made

The government is often one person or a small group (a dictatorship)

You would be paid based on what the government wanted to pay you, and in some cases you would do what job they wanted you to do and what schooling you received

In a command economy the individual has little influence over the three questionsThe Government leaders control the factors

of production, and therefore the decisions made

The government is often one person or a small group (a dictatorship)

You would be paid based on what the government wanted to pay you, and in some cases you would do what job they wanted you to do and what schooling you received


There are only a few countries in the world that have a controlled economy today including China, North Korea, and CubaAdvantage: Speed in rerouting

resources (switching from civilian to war goods)

Disadvantage: lack of incentive to work or show initiative, lack of consumer choices

There are only a few countries in the world that have a controlled economy today including China, North Korea, and CubaAdvantage: Speed in rerouting

resources (switching from civilian to war goods)

Disadvantage: lack of incentive to work or show initiative, lack of consumer choices


A pure market economy allows individuals to make decisions for their selves and their familiesGovernment does not interfere with

economic decisionsIndividuals own the factors of

production and therefore answer the three questions themselves

Prices are the guiding force behind how individuals make these decisions

A pure market economy allows individuals to make decisions for their selves and their familiesGovernment does not interfere with

economic decisionsIndividuals own the factors of

production and therefore answer the three questions themselves

Prices are the guiding force behind how individuals make these decisions


A market is a voluntary exchange of goods and resources between a buyer and seller This occurs anywhere in the world when a

government buys oil, a parent hires a babysitter, you buy an I-phone, etc.

As prices change, they act as signals to others in the system

When the price of gas goes up, it signals that there is a shortage so people should buy less, when it goes down, it means that there is enough for people to buy more

The freedom of prices allows the economy to regulate itself over time (doesn’t occur immediately)

A market is a voluntary exchange of goods and resources between a buyer and seller This occurs anywhere in the world when a

government buys oil, a parent hires a babysitter, you buy an I-phone, etc.

As prices change, they act as signals to others in the system

When the price of gas goes up, it signals that there is a shortage so people should buy less, when it goes down, it means that there is enough for people to buy more

The freedom of prices allows the economy to regulate itself over time (doesn’t occur immediately)

HomeworkHomework

Finish Reading Chapter 2, Start Reading Chapter 19

Continue working on Unit 1 Study Guide

Begin work on Research Paper

Finish Reading Chapter 2, Start Reading Chapter 19

Continue working on Unit 1 Study Guide

Begin work on Research Paper

Bell RingerBell Ringer

Is the market economic system better than the command economic system? Why or why not?

Is the market economic system better than the command economic system? Why or why not?


Economists use the circular flow of activity model to show how a market system works

Economic decisions are scattered among all participants in the economy

Economists use the circular flow of activity model to show how a market system works

Economic decisions are scattered among all participants in the economy

Consumer Spending on Goods and Services

Payments for Use of Resources (Wages, Interest, Rents, Profits

Production of Goods/Services

Sale or Rent of Resources


Advantages of a market economy: freedoms—choose a career, spend or not

spend, own private property, take risks for profit

competition creates more products at cheaper prices, efficient production of goods

Disadvantages of a market economy:Old, young, and disabled would have to

rely on family or other individuals for careDifficult to shift from civilian goods to

military goods in a hurry

Advantages of a market economy: freedoms—choose a career, spend or not

spend, own private property, take risks for profit

competition creates more products at cheaper prices, efficient production of goods

Disadvantages of a market economy:Old, young, and disabled would have to

rely on family or other individuals for careDifficult to shift from civilian goods to

military goods in a hurry


Mixed Economy: combines elements from command and market economies Most countries in the world have a mixed

economy The United States is a mixed economy

Individuals produce and purchase goods based on wants, needs, and price

The government makes laws to protect private property and individuals from bad business practices

Individual goals are based around what type of system you live in Government involvement versus individual

control determines a society’s economic system

Mixed Economy: combines elements from command and market economies Most countries in the world have a mixed

economy The United States is a mixed economy

Individuals produce and purchase goods based on wants, needs, and price

The government makes laws to protect private property and individuals from bad business practices

Individual goals are based around what type of system you live in Government involvement versus individual

control determines a society’s economic system

Characteristics of the American Economy


A pure market system has 6 characteristics:1. Little or no government involvement2. Freedom of enterprise3. Freedom of choice4. Private property5. The profit incentive 6. Competition

All of these characteristics are present in the American economy

A pure market system has 6 characteristics:1. Little or no government involvement2. Freedom of enterprise3. Freedom of choice4. Private property5. The profit incentive 6. Competition

All of these characteristics are present in the American economy



Adam Smith, in his book An Inquiry into the Nature and Causes of the Wealth of Nations, was the first to publish the idea that governments should stay out of the economy If individuals were left on their own they would

work for their own self-interest By working for their own self-interest people

guide the “invisible hand” of using resources wisely to get the most out of them

This is called capitalism Pure capitalism is called laissez-faire meaning

“let [people] do [as they choose]” American capitalism is people owning the

factors of production and using them within legislated limits

Adam Smith, in his book An Inquiry into the Nature and Causes of the Wealth of Nations, was the first to publish the idea that governments should stay out of the economy If individuals were left on their own they would

work for their own self-interest By working for their own self-interest people

guide the “invisible hand” of using resources wisely to get the most out of them

This is called capitalism Pure capitalism is called laissez-faire meaning

“let [people] do [as they choose]” American capitalism is people owning the

factors of production and using them within legislated limits



How is the government involved in the economy today?Regulate quality of food and drugsRegulate banking and moneyInspect hazardous working conditionsProtect the environmentIssue taxes for Social Security, etc.SEC, ICC, FTC and other oversight

organizations

How is the government involved in the economy today?Regulate quality of food and drugsRegulate banking and moneyInspect hazardous working conditionsProtect the environmentIssue taxes for Social Security, etc.SEC, ICC, FTC and other oversight

organizations



Another term for the American economy is free-enterprise system meaning individuals own/control the factors of productionIf you go into business for yourself, you

may become rich, or lose everythingThe government does restrict where

you can open a business, who you can hire, how you can affect the environment, etc.

Another term for the American economy is free-enterprise system meaning individuals own/control the factors of productionIf you go into business for yourself, you

may become rich, or lose everythingThe government does restrict where

you can open a business, who you can hire, how you can affect the environment, etc.



Americans typically get to choose what they buy (freedom of choice)When we don’t buy something, the

company stops producing itThe government has begun

intervening here too—warnings on products, age limits for products, and setting prices when only a few companies produce the product

Americans typically get to choose what they buy (freedom of choice)When we don’t buy something, the

company stops producing itThe government has begun

intervening here too—warnings on products, age limits for products, and setting prices when only a few companies produce the product



Profit incentive is the willingness to produce goods and services in order to make money Profit is all the money left over after a

business’ bills have been paidFailing is a risk that the business owner

takes Americans have the right to own

private propertyWe choose what we want to do with the

property (within legal means)

Profit incentive is the willingness to produce goods and services in order to make money Profit is all the money left over after a

business’ bills have been paidFailing is a risk that the business owner

takes Americans have the right to own

private propertyWe choose what we want to do with the

property (within legal means)



Competition is necessary for the American systemHow does competition lead to

efficient use of resources?Barriers of entrance and exit must be

weakBarriers include: taxes, licenses, laws,

etc.An example: In order to be a teacher,

you must have a teaching license

Competition is necessary for the American systemHow does competition lead to

efficient use of resources?Barriers of entrance and exit must be

weakBarriers include: taxes, licenses, laws,

etc.An example: In order to be a teacher,

you must have a teaching license

The Goals of the NationThe Goals of the Nation

There are six economic goals of the United States:1. Economic freedom2. Economic efficiency3. Economic equity4. Economic security5. Economic stability6. Economic growth

There are six economic goals of the United States:1. Economic freedom2. Economic efficiency3. Economic equity4. Economic security5. Economic stability6. Economic growth


Economic freedom allows Americans to start businesses, own property, and make their own decisionsWhat economic choices will you be free

to make upon graduation? With these

decisions come the possibility of failure— typically the government doesn’t

help failures

Economic freedom allows Americans to start businesses, own property, and make their own decisionsWhat economic choices will you be free

to make upon graduation? With these

decisions come the possibility of failure— typically the government doesn’t

help failures


Economic efficiency requires us to use our resources responsiblyExample: the cost of gas over the

summer averaged more than $4/gallon—this was a sign to the Americans that they needed to reduce consumption of gas or risk using it all up

When we reduced our consumption, the price fell down to $1.50-$2 per gallon

Economic efficiency requires us to use our resources responsiblyExample: the cost of gas over the

summer averaged more than $4/gallon—this was a sign to the Americans that they needed to reduce consumption of gas or risk using it all up

When we reduced our consumption, the price fell down to $1.50-$2 per gallon


Economic equity is desired to make sure all Americans have equal opportunity to be successful (wealthy)This is why there are labor laws for

equal pay and laws for equal access to education despite skin color

This is not to say that the government is responsible for making sure you make the same amount of money as your neighbor when you work at McDonalds and they work for Lockheed Martin

Economic equity is desired to make sure all Americans have equal opportunity to be successful (wealthy)This is why there are labor laws for

equal pay and laws for equal access to education despite skin color

This is not to say that the government is responsible for making sure you make the same amount of money as your neighbor when you work at McDonalds and they work for Lockheed Martin


Economic security is provided by the government with regards to issues that are beyond our controlNatural disasters, accidents, old age,

bank failuresThe government helps people by

paying Social Security, Unemployment, or through FEMA and the FDIC

Economic security is provided by the government with regards to issues that are beyond our controlNatural disasters, accidents, old age,

bank failuresThe government helps people by

paying Social Security, Unemployment, or through FEMA and the FDIC


America hopes to avoid extreme ups and downs in the standard of livingStandard of living: the material well

being of an individual, group or nation measured by how well their necessities and luxuries are satisfied

The US has one of the highest standards of living in the world

America hopes to avoid extreme ups and downs in the standard of livingStandard of living: the material well

being of an individual, group or nation measured by how well their necessities and luxuries are satisfied

The US has one of the highest standards of living in the world


Economic growth is a goal of all nationsA country must be able to increase the

amount of goods and services produced over time to keep up with expanding populations

A trade-off must occur when one of the goals is competing for resources from another goalPoliticians must understand the goals and

how to most appropriately use resources to get the most out of them

Economic growth is a goal of all nationsA country must be able to increase the

amount of goods and services produced over time to keep up with expanding populations

A trade-off must occur when one of the goals is competing for resources from another goalPoliticians must understand the goals and

how to most appropriately use resources to get the most out of them


There are many rights that come with being in a free-enterprise systemEnter almost any profession you wantOpen up any businessWork a little or work a lot

To have these freedoms, there are certain responsibilitiesMust support yourself/familyMust elect responsible government

officials

There are many rights that come with being in a free-enterprise systemEnter almost any profession you wantOpen up any businessWork a little or work a lot

To have these freedoms, there are certain responsibilitiesMust support yourself/familyMust elect responsible government

officials

HomeworkHomework

P. 45 #1-2P. 50 #1-3Continue working on your Factors

of Production Project

P. 45 #1-2P. 50 #1-3Continue working on your Factors

of Production Project

bell ringer do all countries have the same economic needs/goals?

Documents

economic needsgoals

economic decisionsindividuals

types of economic systems

controlled economy

americas system

economic systemsyour

command economy

traditional economy