PowerPoint Presentation

*The Industrial Revolution Kirby-CHS

Lesson Seven : Economic Systems

*Concentration on these slides is guarantied to improve your World History grade.

Warning2We will be using Cornell Note Taking Format Today! Relax and enjoy the ride In History Class!

Dont be a victim.. Own the day!Unit Learning Objectives:North Clackamas School District Social Studies Priority Standards:

HK 2. Analyze the complexity and investigate causes and effects of significant events in World History.

Lesson Seven: Daily Learning TargetI Can. Describe The Three basic Economic Systems

The Market SystemSurvival for any society depends on its ability to provide food, clothing, and shelter for its people.The Economic System is the organized way a society provides for the wants and needs of its people.Why Do We Have Economic Systems?

Markets are places where people can exchange the things they have for the things they want.

Adam Smith was the first economist.In his book, The Wealth Nations (1776),Adam Smith explained how free marketsfunctioned.The Free MarketIn a free market economy, people are free to buy and sell whatever they want.

Obviously, we do not live in a completely free market economy.

There are some restrictions on what we can buy and sell.

In the United States today, there are someproducts that we cannot legally buy. We can buy a rifle but not this gun.Laissez-faireLaissez-faire is the doctrine that states that the government should not intervene in the marketplace.

It means let them do (as they please).

In a free market, the government does not regulate the economy.

FREEDOM OFENTERPRISE& CHOICEPRIVATEPROPERTYROLE OFSELF-INTERESTCOMPETITION

Six Characteristics of Market Systems

MARKETS& PRICESFREEDOM OFENTERPRISE& CHOICEACTIVE, BUTLIMITED,GOVERNMENTROLE OFSELF-INTERESTCOMPETITION

PRIVATEPROPERTYSix Characteristics of Market Systems3 Characteristics of all Economic SystemsReliance on TechnologyandCapital GoodsUse of MoneySpecialization which makes workers moreefficient

Comparing Mixed Economies

IranNorth KoreaCubaChinaRussiaGreecePeruUnited StatesSouth AfricaFranceUnited KingdomBotswanaCanadaSingaporeHong KongAn economic system that permits the conduct of business with minimal government intervention is called free enterprise. The degree of government involvement in the economy varies among nations.Not So Much Free Enterprise

Levels of DevelopmentSouth AmericaCentral AmericaCaribbeanUnited StatesCanadaSouthern AfricaMiddle AfricaEastern AfricaWestern AfricaNorthern AfricaSouthern EuropeWestern EuropeEastern EuropeNorthern EuropeWestern AsiaSouth Central AsiaEast AsiaSoutheast AsiaOceaniaTropic of CancerTropic of CapricornEquator

High-income economies(Per capita GNP $9,386 or above)Middle-income economies(Per capita GNP $765 to $9,385)Low-income economies(Per capita GNP $764 or below)No data availableLevels of development vary greatly among nations.Ranking DevelopmentHigh income economies[Per Capita GDP $9,386 +Middle income economies[Per Cap. GDP $765-$9,386Low income economies[Per Cap. GDP-below $764No data availableIndex of Economic Freedom[Ranking of 180 countries for 2013]1. Hong Kong3. Ireland5. United States20. Belgium31. Spain48. France101. Brazil126. China146. Russia 148. Venezuela156. Cuba179. North KoreaFREEMOSTLYFREEMOSTLYUNFREEREPRESSED

The Three Basic Questions... What, how, & for whom1. What will be produced?

The Market System At WorkA. Traditional Custom rulesB. Command Government rulesC. Market Individuals ruleD. Mixed 1.) Capitalism modified free enterprise 2.) Communism command w. some market 3.) Democratic Socialism socialist democraciesEconomic Systems

Economic activity is based on ritual, habit and custom.StrengthsEveryone knows their role.Little uncertainty over what to produce or how to produce.The question of For Whom to produce is answered by custom.Life is generally stable, predictable, and continuous.

WeaknessesTends to discourage new ideas.Lack of progress leads to lower standard of living.

1. Traditional Economy

Government rules.Economic decisions are made at the top and the people are expected to go along with choices their leaders make.

StrengthsChange direction drastically in a relatively short time (The USSR went from an agrarian to industrial nation in a very short time).WeaknessesNot designed to meet the wants and needs of individuals.Lack of incentives to work hard leads to unexpected results.Large bureaucracy for economic planning.Not flexible in dealing with minor day to day problems.People with new or unique ideas are stifled.

Fidel Castro

Karl Marx

2. Command Economy

Adam SmithScotland1723-1790

Father of Economics [Adam Smith]Laissez Faire Economics(No government intervention)SpecializationThe Wealth of NationsSelf InterestThe Invisible Hand

1776People and firms act in their own best interest to answer economic questions.

Markets allow buyers and sellers to come together in order to exchange goods and services.

Markets can adjust over time.Freedom exists for everyone involved.Relatively small degree of governmental influence.Decision making is decentralized.Variety of goods and services are produced.High degree of consumer satisfaction.

Strengths

Invisible hand 3. Market Economy

The primary weakness is deciding for whom to produce.The young, sick and old would have difficulty in a pure market environment.Markets sometimes fail.Competition (monopolies may develop)Resource mobility (resources are sometimes hindered from moving about)Availability of information (producers often have more information than do consumers, which gives them an advantage)

Weaknesses of a Market Economy

You are free to:Choose your occupationChoose where and when you workWork for yourself or someone elseLeave your job and to move to another job

Businesses are free to:Choose which workers they wantChoose where and how they produceEconomic Freedom

Types of Economic SystemsTraditionalEconomic decisions are based on customs & beliefs.

Change is discouraged and sometimes even punished.

Methods of production are often inefficient.

Family and community ties are strong.MarketEconomic decisions are made by individuals.

Individuals own the factors of production and choose what to produce based on the info provided by market prices.

Consumer choice is large.

Little incentive to engage in unprofitable ventures like caring for the sick.CommandEconomic decisions are made by government leaders.

The government owns the factors of production.

Prices are set by the government.

Consumer choice is often limited.

Resources can be quickly rerouted.

Income distribution can be controlled by the government.