T ypes of economies

ALLOCATION OF LIMITED RESOURCES – RESOURCES scarce – WANTS unlimited

The function of an economy is to find ways how to , allocate these scarce resources basically

:answering the following questions

T he main questions an economy should provide answers to:

WHAT ?to produce

WHO ?to produce for

HOW ?to produce

WHY ?to produce

THREE TYPES OF ECONOMIES

MARKET ECONOMY

PLANNED ECONOMY

MIXED ECONOMY

......IN DIFFERENT ECONOMIES WHO

Owns Provides Allocates Distibutes Compete Decides Ensures Passes

?scarce resources ?against each other ?fair competition , what to produce how

?and who for ?laws ?means of production ?goods and services , , police defence

?judiciary minimum standard of

?living

O wns means of production P rovides a minimum standard of living O wns scarce resources A llocates scarce resources D istributes goods and services C ompete against each other D , ecides what to produce how and who for E nsures fair competition P asses laws E , nsures police defence and judiciary

State owns the means of production

Decides about the allocation of resources

More equal distribution of goods and services

No competition among companies

RB Read p. 30 (Planned &

Market E.)

Government intervention at minimum

Private individuals and businesses own the means of production

The main aim is to make profit and the businesses compete against each other

The market mechanism – the law of supply and demand decides what to produce, how to produce and who gets what is produced

PLANNED ECONOMY(command e.)

MARKET ECONOMY (capitalist, free enterprise e.)

MARKET OR PLANNED ECONOMY? demand and supply state-owned resources competition production of standardised goods of lower quality profit equal distribution of wealth in society wider choice and better quality of goods production for need, not profit

MIXED ECONOMY It is a mixture of the planned and market economy The country’s e. is devided into two parts or sectors

according to ownership: PUBLIC SECTOR – owned by the government PRIVATE SECTOR – owned by private individuals and

businesses Resources are allocated by the forces of supply and

demand The government regulates the market

How do mixed economies work? Think about some of the goods and services that you have

used in the past few days. Are they part of the public or private sector?

When we purchase smth from a private retailer we assume that we are contibuting to the private sector. When, however, we use a government service, we enjoy smth that the public sector provides often mistakenly believing that such a service is free of charge.

Let’s examine this idea through the example of taking a ride in a taxi cab. Imagine that you took a taxi on a rainy afternoon. When the ride is over, you paid the driver, who, after subtracting his costs, made a small profit on driving you in his privately owned car. This seems like a transaction that took place exclusively in the private sector.

Although it is not obvious at first glance, government plays an important role in regulating traffic in general and the work of cab drivers in particular. The roads that taxis drive on are also public goods paid by the taxes that people – like the cab driver – pay on their income.

No private business could exist without public goods and services: they are protected by the police, use streetlights, their employees are educated in the public school system and kept healthy or cured in public hospitals.

At the same time, all governments want to encourage the success of private businesses, because without their contribution to the budget, in the form of taxes, public goods and services would not exist.

Boglarka Kiss-Kulenović Taken from the Coursebook English for Business 1

• Some resources are a_______ by the state (public sector), and some by the market system (private sector).

• The public sector s______ public goods by local or central government (goods used by general public, paid through _________).

• The state usually p______ a minimum standard of living for the poor.• The government e______ fair competition.• In the private sector means of production are o_______ privately.

M ixed economy

MIXED ECONOMYPRIVATE SECTOR v. PUBLIC SECTOR

• the government (central or local) owns and allocates r _____

• the government supplies p_____ g_____ and s______

•the government ensures a level p____ f___

• private individuals own r________

• firms make d______

•firms allocate r_____ in response to demand

→RB, p. 30

CE → CAPITALIST OR MARKET ECONOMY

PE → PLANNED ECONOMY

ME → MIXED ECONOMY

BIDDING SENTENCES1. In CE resources are allocated by the government.2. Public goods in ME are provided free when used and

are paid for by taxes.3. The role of the government in CE is to pass laws, plans

and organises the production process.4. In ME, in the private sector, production decisions are

made by firms in response to the demands of consumers, and individuals are allowed to own the means of production.

5. In PE, production is for need rather than for profit.6. In ME the state usually provides a minimum standard

of living for the poor.7. In PE there is more equal distribution of income and

wealth.8. In the CE the government doesn’t ensure a level

playing field.9. In ME, the public sector (central or local government)

is responsible for the supply of some public goods and services.

1. All the countries with PE have a good standard of living. 2. In ME some resources are allocated by the government

and some by the market.3. Private firms are interested in financing national

defence and police.4. Laissez-faire economy is another name for planned

economy.5. Since the only interest of firms in CE is profit and lower

costs, they often tend to sacrifice public interest.

SPEAKING TASK

MAKE A PRESENTATION ON EACH TYPE OF ECONOMY IN GROUPS OF THREE. USE THE INFORMATION IN THE GRID.

Student 1: market economyStudent 2: planned economyStudent 3: mixed economy

USE YOUR NOTES TO MAKE A SHORT SUMMARY ON ONE TYPE OF ECONOMY

FILL IN THE GAPS.

After World War II there were several _________________ economies in the world, _________________ present there are only a few left.

Both Croatia and Sweden are _________________ states, Sweden, however, provides a much higher _________________ of living to its citizens.

In Croatia some resources are _________________ (e.g., silver) and some are _________________ (e.g., lumber).

In the _________________ sector the state _________________ decisions about what to produce.

The _________________ of goods and services is more equal in planned economies, the standard of _________________, however, is lower than in _________________ or _________________ economies.

The majority of US and Canadian universities require that foreign students provide proof of their _________________ abilities, i.e., that they can support themselves while studying there.

Change these verbs into nouns: VERB NOUN VERB NOUN need supply want demand produce disribute own plan allocate intervene compete

Write true and meaningful sentences using the following terms:

economic system, allocate____________________________________________________

_____________________ resources, own____________________________________________________

_____________________ decide, market mechanism, market economy____________________________________________________

_____________________ mixed economy, two sectors

: “ ”, - , - , , -Source of exercises English for Business Kiss Kulenović Lekaj Lubina Lumezi Linčir Planinšek Čikara