what do you know about the differences between and
TRANSCRIPT
Bell Ringer
What do you know about the
differences between
and ?
Objectives
1. Identify the three key economic
questions that all societies must
answer.
2. Analyze the societal values that
determine how a country answers the
three economic questions.
Introduction
Each society is guided by its economic
system, which affects the way in which it
does business within the society itself
and with other societies.
A society’s values, such as freedom or
tradition, guide the type of economic
system that society will have.
Three Economic Questions
As a result of scarce resources, societies must
answer three key economic questions:
What goods and services should be
produced?
How should these goods and services be
produced?
Who consumes these goods and services?
Question 1
What goods and services should be
produced?
Each society must decide what to produce in
order to satisfy the needs and wants of its
people.
What can be produced is also limited by a
society’s available resources.
Question 2
How should goods and services be
produced?
As a society decides how to produce its
goods and services, it must consider
how to maximize efficiency using its
land, labor, and capital.
Question 3
Who consumes goods and services?
This question is largely determined by how
societies distribute wealth/income.
If not wealth, then another metric is used to
determine who will get to consume the
goods and services produced.
Ex.- Government loyalty, family lineage, control
of military power, etc.
Review/Summary
How does the United States answer the
three key economic questions? What? How? Who?
Economic Goals Assignment
JigsawGroups of five people
Read pg. 25-27 “Economic Goals”
Assign one goal for each person to read, take notes on, and report back to rest of the group
2-3 bullet points per section
Put into your notes
Review/Summary
Societies value some economic goals over others, and often these goals are in conflict with one another.
In your opinion, how does American society prioritize these goals?
Rank the goals from most important to least important
(Summary for today’s notes)
Bell Ringer
• The three key economic questions are
________? ________? and ________?
• What are the five economic goals?
• Which of the goals do you think is the
most important for a society to achieve
for its people? Why?
Introduction
Economic system: the methods and philosophies that a society uses to produce and distribute goods/services
Today, there are four basic types of economic systems:
Traditional
Free market
Command/Planned
Mixed
Free Market
Economy
Free Market Economy
What are the characteristics of a free market
economy?
A free market economy is characterized by:
Households and firms (companies)
Economic freedom
Private ownership
Self-interest & Competition
Self-Interest
In The Wealth of Nations (1776),
Adam Smith observed that in the
countless transactions that occur in
the market, the buyer and seller
consider only their self-interest.
Self-interest is the motivating
force in the free market.
The Invisible Hand
Why is self-interest and competition important to the free market?
Adam Smith called the self-regulating mechanism of the market “the invisible hand.”
According to Smith, self-interest and competition work together to create and regulate the market.
http://www.youtube.com/watch?v=ulyVXa-u4wE
A not so “Free” Market
Despite the advantages of a free market
economy, no country today operates
under a pure, unregulated free market.
Storyboard
Create a storyboard of the concept of the “invisible hand.”
The storyboard should include:
Section title “The Invisible Hand”
3-5 sentence summary & example of concept*
Visual/illustration that shows an example of the concept
Create a higher-level question (level 2 or 3)
*Page 33 in the textbook
Key Terms
market: any arrangement that allows buyers and
sellers to exchange things
free market economy: an economic system in
which decisions on the three key economic
questions are based on the voluntary exchange in
markets
Key Terms, cont.
incentive: the hope of reward or fear of
penalty that encourages a person to behave
a certain way
invisible hand: a term coined by Adam Smith to
describe the self-regulating nature of the
marketplace
Bell Ringer
In 2007, Apple released
the first iPhone.
Using the concept of the
“ ,” explain
why companies no longer
produce flip phones.(in large quantities)
Command Economy
What are the characteristics of a command
economy?
A command (or planned) economy is
characterized by:
Government answers the three key economic
questions (What? How? Who?)
Economic security
Private property, free market pricing, competition,
and consumer choice
Command Economy
Communism
Under Communism, the central
government owns and controls all
resources and means of
production.
Communism derived from the
writings of Karl Marx
The inevitable cost of the free
market, according to Marx, was
the exploitation of workers and an
unfair distribution of wealth.
The Soviet Union and China
The Soviet Union became the
world’s first communist state in
1917, and remained so until it
broke up in 1991.
Today, China has the most
powerful command economy in the
world.
However, China’s economy has
moved more toward a free market
economy in recent years.
North Korea
North Korea remains the last total command economy in the world.
The North Korean economy is dominated by the government, which owns all property, capital, and labor.
Communism Today
What are the five communist countries left in the
world today?
Socialism
Socialism describes a range of
economic and political systems based
on public ownership of resources and
the belief that wealth should be more
evenly distributed throughout society.
The “Robin Hood Principle”
Common Socialist Programs
“Free” or reduced-cost health
care & education
Paid sick leave
Food & housing assistance
Social security and
unemployment payments
Government ownership of
major industries/services
During the Socratic Seminar
Participate. Participate. Participate.
Refer to text to support your comments or questions.
Take turns speaking instead of raising hands. (Three before me.)
Discuss the text, not each other’s opinions.
Speak clearly.
Listen carefully.
Key Terms
command economy: an economic system in which
the government makes all decisions on the three key
economic questions
socialism: a range of economic and political
systems based on the belief that wealth should be
distributed evenly throughout society
Bell Ringer
List two differences and two similaritiesbetween the economic systems of Sweden
(more like socialism) and the U.S. (more like a free market)
Market or Command Economy?
1.Read the excerpts from The Wealth of Nations and The
Communist Manifesto. Summarize each passage in your own
words. Six total summaries, one-two sentences each.
2. Create TWO T-charts, each listing the costs and benefits
(pros and cons) of both free market and command economies.
List five for each side.
3. Imagine you are an economist helping with the creation of a new
nation. Which economy should the nation adopt? What
elements of the free market and command economies would
you use? Why? Minimum five sentences. Refer to your cost-benefit analysis.
Bell Ringer
# of countries with completely = 0
# of countries with total = 1
Therefore, all (functioning) economies are a …
Why do you think this is?
Mixed Economy
Introduction
What are the characteristics of a mixed economy?
A market-based economy with some
government intervention
Government helps societies meet needs that
would be too difficult for them to meet under a
totally free market economy… such as??
Government protects property rights and
ensures fair exchanges in the marketplace
Mixed Economy
Even free market thinkers like Adam
Smith recognized the need for a limited
degree of government involvement in
the economic marketplace.
In a mixed economy, the market is free
but has a certain degree of government
control.
Spectrum of Mixed Economies
Almost all modern economies are mixed
economies.
Privatization
Many former communist countries have transitioned to a mixed economy through privatization.
Privatization is the transfer of ownership from the government to private citizens.
China
China is moving closer to the center of the economic continuum.
Over the past twenty years, China has gone through an economic transition through privatization of state-owned firms.
South China Mall
Dongguan, China
7.1 million ft2
Privatization
Privatization in the U.S. has had mixed results.
Often, increased profits come with moral consequences:
For-Profit Charter Schools
Blackwater in Iraq
“Kids for Cash”
The United States
The United States is a
mixed economy
whose foundation is
the free market.
It is characterized as a
free enterprise system
(a more accurate
name for capitalism)
Key Terms
laissez faire: the doctrine that government generally should not intervene in the marketplace
mixed economy: a market-based economic system in which the government is involved to some extent
privatization: the process of selling businesses or services operated by the government to individual investors, and then allowing them to compete in the marketplace
Exit Ticket - Mixed Economy Flow Chart
Working with a partner, create
your own circular flow chart
for a firm (company or
service) of your choosing.
Follow the circular flow model
found on page 40 in the
textbook, plugging in details
for the firm that you chose. https://youtu.be/B43YEW2FvDs?t=5m37s