Daily Writing Prompt

What are the four types of economic systems?

The Free Market• Individuals and businesses own the factors of

production• Self-interest – buyers and sellers consider

their own personal gain• Businesses engage in competition for

consumer dollars

Free Market (cont.)

• Profit is the incentive to participate in economic activity

• Profit = financial gain• Revenue = income, $ you take in• Cost = $ you spend• P=R-C

Adam Smith

• Adam Smith wrote The Wealth of Nations• “The Invisible Hand”• No government intervention• Consumers get products they want• Prices reflect costs of producing products

Advantages

• Highly Efficient• Economic Freedom• Competition

encourages innovation and growth

Disadvantages

• No economic security

• Inequality• Monopolies

Command Economy

• “Centrally-Planned”• Government controls the factors of

production and decides what gets produced• No consumer sovereignty

Communism• Karl Marx & Friedrich Engels – The

Communist Manifesto

• Workers will overthrow their oppressors & establish an equal society

• “Workers of the world, unite!”

Advantages:

• Focus on equality• More social

services• Stable

Disadvantages:

• No incentives to work hard•Inefficient – can’t adjust to consumer demands•Limited freedom

GovernmentEc

onom

y

Free Not Free

Free

Not Free

Making Choices

• Trade offs – all of the alternatives that we give up when we make a decision

• Opportunity Cost – the most desirable alternative given up as the result of a decision

Making Choices

• Guns vs. Butter: Refers to the trade off that countries make when choosing between producing domestic or military goods

Exit Ticket

• How are market and command economies different?

• What are the advantages and disadvantages of market and command economies?

Do Now

• Pg. 28 #3,5,6,7• Pg. 34 #3,5,6• Pg. 38 #3,4,5,6

Adam Smith & Obama

• Would Adam Smith have agreed or disagreed with President Obama’s handling of the economy?