Command and Market Economies and the 5 Social Goals of Economic SystemsMs. Helton01/10/12Global Issues

Bellwork

•Last week, you defined the terms “command economy” and “market economy”. Using your notes, contrast these two systems. Hint: the term “command” is somewhat related to the government type we discussed where the government controls production

How Does an Economy Work?

•The way nations answer three basic questions defines their economic systems.

• 1. What goods and services should be produced?

• 2. How should the goods and services be produced?

• 3. For whom should the goods and services be produced?

Market Economies▫In a pure market economy there is no government involvement in economic decisions. The government lets the market answer the following three basic economic questions:

1. What?

2. How?

3. For whom?

Command Economies

• In a command economy the government answers the three basic economic questions.

▫ 1. What?

▫ 2. How?

▫ 3. For Whom?

Answer: Mixed Economy

•All economies in the world today are mixed. There is some government involvement in the economy.

•Total economic freedom is impossible•So how does the US and other countries use

their limited resources to address the wants and needs of their people?

How Government Blends Society and the Economy

•Total economic freedom is impossible•All societies establish laws that

sometimes keep people from buying things▫Examples?

•All goods and services that can be produced and consumed make up the money a country’s economy brings in

•Let’s look at the sheet labeled Activity 2 together

Gross Domestic Product (GDP)

•How economic growth is measured•How much money a country makes in a

year divided by its population•If the population is growing or stable, the

country has to increase the number of goods and services it produces every year

Gross National Product (GNP)

•Total market value of all final goods and services produced by a country (doesn’t use population)

•Example: Bread- only the final price of a loaf of bread is used, because the price of its ingredients (milk, flour, etc.) is already factored into that final price

How Government Blends Society and the Economy (cont.)

•Government bases its control of market on five social goals: freedom, growth, stability, equity and efficiency

•Let’s look at the worksheet labeled Activity 1 together

Group Activity

•You have 100 points that you can assign to each of the 5 goals listed in Activity 1

•Decide which order you think would be best for a country and give points accordingly (more points if it’s a big deal to you)

•I will ask some groups to share their views, then we will do a class tally of points to see our class’s order

Exit Slip

•Use the same sheet of paper as your bellwork!

•Using the order of the goals decided on by the entire class, answer the following: Is the fantasy economy of the class a market or a command economy? Justify your answer using what you know and the sheet labeled Activity 2.

•Turn in before your leave class•Tomorrow we will apply what we learned

to different countries