Quiz Monday Review Key Terms on p25 Decision Making Model Know laws and fallacies Be able to graph a production
possibility curve, diminishing returns and increasing returns to scale
Goal of the Widget Game You want to make the most profit
you can and beat your fellow competing teams.
Rules There are 6 Rounds Each round is 3 minutes long No calculators or phones with calculators You cannot discuss business tactics with other
teams (until the 4th round and only the 4th round) You must report and show your numbers to the
teacher at the end of every round You may not use scrap paper to test different
combinations You may not erase, cross out or change your
numbers. Any changes will result in 0 profit for that round
Any cheating and your team will be disqualified
Homework Answer the questions from the
exercise Study for quiz on Monday Notes are on wikisite lredmond.wikispaces.com
Answers from Questions from the Widget Game At what level of production is sales
revenue highest for this industry?
At what level of production is profit highest?
How and when did your firm calculate its profit potential
How close did you come to realizing your fair share of this competitive market?
What prevented you from maximizing your profits? Which decisions most adversely affected your profits during this game? What adjustments would you make next time?
Not understanding market conditions represented by the formula $100-Q
Incorrectly anticipating the moves of rival teams
Overreacting to previous round results
Competition reduces profit levels
Who would have benefited most if you had conspired to fix production levels? Why would the government not tolerate this kind of activity?
Capitalism: A Love Story The film focuses heavily on a moral
condemnation of capitalism. Do you agree with that approach?
Corporations repeatedly claim that cutting jobs will allow them to save money and stay in business. Why does this not seem to work much in the examples detailed in the film?
What did you find most troubling when watching the film?
Of the four political models; captialism, communism, socialism and fascism, which do you think is best for western society? Why?
Factors of Production Productive resources: Anything that
can be used to create or manufacture goods or services
Land Labour Capital
Labour Human contribution to
production process Physical Labour (TANGIBLE) Mental Effort (INTANGIBLE)
Entrepreneurship: Organise, Assume Risk, Achieve Results, Innovation
Knowledge: Science, use and creation of technology
Environmental: Political stability, social values
Capital Goods that aid in the production of
other goods Real Capital: Factories, Machines,
equipment Money Capital: Funds to acquire Real
Capital and other factors of production Example: Wages to acquire labour
EconomicsEconomics is the social science that
studies the production, distribution, and consumption of goods and services
Answers the questions: What gets made? Who gets to have it? How do they get it ?
Economist: A person who studies economics
Economic Systems
An Economic System is the way government and business work together to provide goods and services to consumers
Government: Public Sector
Business: Private Sector
Traditional Economy System Goods and services produced today
are the same as those produced in the past, and in are produced the same fashion
Common in underdeveloped countries
Practices of the past determine what, how and for whom we produce.
Traditional Economy What to produce:
Same products as in the past
Same quantity – subsistence
For whom to produce: Own use Family Tribe
How to produce: Traditional
Methods Skills passed
from parent to child
Bedouin of Sahara Desert
Traditional EconomyStrengths
Little environmental damage
Consumption and waste are minimized
Focus on self reliance
Control price and quantity
FREEDOM!!
Weaknesses No social
improvement Limited planning Limited choice of
products Individualism
Discouraged
Examples of Traditional Economic Systems
The Bedouin of the Sahara Desert The Bushmen of the Kalahari Desert The Mongols of the Gobi Desert
Command Economy All production decisions are made by a
small group of political leaders who have the power to enforce their decisions throughout the entire economy.
Supply and price are controlled by the governement
What, how and for whom to produce are all answered by the central authority
Command Economy What to produce:
Decided by state through central a planning authority
Capital Goods For whom to
produce: Decided by state
through a central planning authority
How to produce: Decided by state
through central a planning authority
North Korea
Cuba
Command EconomyStrengths
Planning Promotes Growth (Capital Goods vs Consumer Goods)
Reduces waste Equitable distribution
of wealth Economic Stability Needs are provided
for
Weakness Bureaucratic and
inflexible Limits individual
choice Personal Consumer goods
Quotas foster quantity over quality
Little incentive To strive socially To innovate
Pure Market Economy Economic activity is coordinated by many
individuals who make independent decisions in a free market
Supply and demand determine prices
The actions of individual buyers and sellers in the marketplace answer what, how and for whom goods and services will be produced.
Pure Market System Also called Free market, Free Enterprise, Capitalist system
What to produce: What will sell at
the most favourable price - Market
For whom to produce:
Consumers WILLING and ABLE
How to produce: As efficiently as
possible to keep costs/price low
Pure Market System Also called Free market, Free Enterprise, Capitalist system
Strengths Freedom of choice Variety of goods Competition =
quality, innovation, better prices
Profit motivates Flexibility
Weakness Poor distribution of
wealth Boom and Bust
cycles (hurt) Large producers
can manipulate prices
Waste and over consumption
Modern Mixed Economy
Business and government answer questions
Business and Government each are responsible for production and distribution of different goods and services
Public Sector: Parts of the economy run by the government
Private Sector: Parts of the economy run by business
Modern Mixed EconomyWhat would they produce Public Sector: Law enforcement Health Care Public swimming
pools Garbage Collections Education Public Transit Post National Defence
Private Sector: Food Water Clothing Phones Hot tubs Computers Cars Etc
Modern Mixed Economy Almost all countries are mixed
economies. They exist on a spectrum The roll of government and business
change over time
Understanding Political Economies Economics works within a
governmental framework Some examples of how government
has affected the economy Ex New government rules regarding
housing and mortgages Ex Trade agreements - NAFTA
GOVERNMENTS SET THE RULES OF THE GAME
Tax Cuts Good Saving High enough Lower taxes will
allow people to spend more
Bad Fewer public
services Lower quality
public services Increase
government debt
Socialism Capitalism
Communism Fascism
Command Economy
Market Economy
Dictatorship
Democracy
Extreme Left
Moderate Left Moderate Right
Extreme Right
Political Orientation
Political Economies Democracy:
Freely elected government Represents majority of citizens Limited term in control Open to other political views Checks and balances can make system
inefficient Dictatorship
Single person or group absolute control No way for citizens to change their leadership Not hindered by checks and balances
Find an Example Communism: Cuba, North Korea
Socialism: Sweden, Norway, Denmark
Capitalism: US
Fascism: Nazi Germany, Argentina (1970-1980s)
Communism Command economy + Dictatorship Based on the theories of Karl Marx,
Friedrich Engels and Vladimir Lenin Under Communism
Private Property & Free enterprise are abolished
Strong central government Examples: Cuba, North Korea
Socialism
Command Economy + Democracy Based on public ownership or control Allows democratic and peaceful methods Claims that free enterprise is inefficient and
wasteful Labour movement – co-operation and worker
solidarity Equitable distribution of goods Examples: Scandinavian Countries (Free
enterprise socialism)
Socialism = Happiness?? Top 10 Happiest Countries
Norway, Denmark, Finland, Sweden, Switzerland and Netherlands
In Norway… Free universal health care Free post-secondary education 1 year paid maternity leave/4 week mat leave 16 days paid sick leave Unemployment rate ~2% Poverty rate 1.7%
Capitalism Market Economy + Democracy Based on the theories of Adam Smith Focuses on the accumulation of capital
resources as a means to greater wealth Private ownership is key Producers are driven by Profit Examples: Canada, US
Fascism Market Economy + Dictatorship Based on the theories of free market
economy with a non democratic with authoritarian form of government
Do not tolerate political opposition Ex Nazi Germany, Chile under
Pinochet
Homework Come up with 2 pros and cons for each
political model (capitalism, fascism, socialism and communism)
Fill in the political economic model
Capitalism Pros
Promotes economic growth
Econcomic freedom Decentralized=more
competion=better prices
People who work hard are rewarded…sometimes
Cons It’s all about the za
benjamins Wasteful=Depletio
n of resources Wealth inequality Booms and busts
Socialism Pros
EQUALITY Medical Social Economic Political
no man/woman left behind
Cons Higher cost Less
entrepreneurship Government has
more power Free ride Little incentive to
be all that you can be
Communism Pros
Efficiently distribute resources
Focus is on cooperation of resources
Incentive to participate
Cons Difficult to maintain a
common goal Block out external
culture and competition=weakening of their economic system
Fascism Pros
Strong military Unity Laws can be
passed quickly Opportunities for
private business and property
Cons Corrupt Controlling Promotes war and
violence