Economic Systems in Southwest Asia

SS7E5 The student will analyze different economic systems.

Compare and contrast the economic systems in Israel, Saudi Arabia, and Turkey.

3 Type of EconomiesTraditionalCommandMarket

Most countries are not purely any of these. That is why we have a 4th type, called Mixed.

Economic Continuum

Comman

d

Market

Most economies have elements of both systems. So, most economies are Mixed. However, they may lean closer to one or the other.

Israel’s EconomyMixed, but on the Market side.

What to produce? A large portion of Israel’s GDP comes from high tech manufacturing, financial services, and agriculture.

How to produce? Israel has substantial government ownership of business, but is gradually privatizing companies.

For whom to produce? The private sector produces goods and services for domestic and international markets based on the market price system.

Saudi ArabiaWhat to produce? World’s leading producer of OIL.

petrochemicals, mining, and refining. How to produce? Over 95% of the oil industry in

the country is operated by the government. Most other major industries have significant government involvement.

Since the 1980s, the Saudi government has been trying to increase private ownership of business

For whom to produce? 1/3 of Saudi Arabia’s GDP is based on exports to other countries. (This is due to the economy’s reliance on the oil sector.)

Saudi Arabia Continued1/3 of labor force are specialized labor from

other countries. Some private industry, but much is owned by

the government.

Does this type of economy look more like a Command or Market?

TurkeyWhat to produce? Turkey has a diversified

economy with large service, manufacturing, and agricultural sectors.

How to produce? Since the late 1980s, Turkey has gradually moved from a government directed economy to more private enterprise….still mostly government directed.

For whom to produce? 1/5 of Turkey’s production is exported. The remainder is consumed by domestic consumers and the government.

Turkey ContinuedWhere on the Economic Continuum would

Turkey fall?

Iran

What to produce? Major Oil Producer , but also good in manufacturing, textiles, building products, and agriculture.

How to produce? Some private companies, but the government maintains tight control of most industries.

For whom to produce? Oil is exported, but economic sanctions are hurting the economy.

SpecializationOccurs when one country can produce a good

or service at a lower opportunity cost than another country.

This encourages trade with other countriesIt helps the economy

Do you think Over Specialization could be a problem? Why?

Trade BarriersAnything that slows down or prevents one

country from exchanging goods with another

TariffA tariff is a tax placed on goods when they are (imported) brought into one country from another.The purpose is to make the imported item more expensive than a similar item made locally.

EMBARGOWhen one country announces that it will no

longer trade with another country in order to isolate it and cause problems with that

country’s economy. This usually happens when two countries are having a political

dispute.

OPECOrganization of Petroleum Exporting

CountriesIran, Iraq, Kuwait, Saudi Arabia, Qatar, Libya,

Algeria, Angola, Venezuela, UAE, Nigeria, Ecuador

Influences the price and supply of oilNot all Middle Eastern countries are a part of

OPECNot all OPEC countries are from the Middle

East

If Supply , what happens to Price???

Human CapitalThe work forceEducation and TrainingKnowledge and skill that make it possible for

workers to earn a living producing goods and services.

GDPGross Domestic ProductThe value of all goods and services produced

in a nation in a given year.

Human Capital and GDPDoes Literacy and Education have an impact

on GDP? Explain.