Do-First: Use the definition below to define an economic system. Information on the production and exchange of goods among a group of people SWBAT Characterize components of economic systems by completing guided notes and reading system comparison notes.

Basic Economic Questions A country must decide: What is being produced? How is it being produced? For whom is it being produced?

Command Style Economic System Communism Socialism Gov. sets economic goals, complete control Workers labor together, share wages equally No private property Political and Economic Structure Ex: North Korea Mix of government and private ownership of businesses Gov. often provides low-cost of free public services (schools, health care, etc.) Ex: Norway

Market Economic System Called capitalism Consumers and producers decide what, how, and the # that will be produced Prices set by supply and demand Investment and entrepreneurs Motivation = make a profit Competition Ex: United States

Traditional economic systems Meet basic needs like ancestors Based on customs and beliefs Look to elders for decisions Technology rarely used Found in rural, undeveloped countries

Mixed economy NO country economy will fall perfectly into one of these categories. Mixed economies will be a combination of the 3 major systems listed, but will have one that is dominant.

Subsistence vs Commercial Agriculture Subsistence Agriculture-Small Scale people make barely enough food for survival. Example: People in developing countries Commercial Agriculture-Large Scale People make food for a profit. They send their goods to market. Examples: Midwest Corn Production

Cottage Industry vs Commercial Industry Cottage Industry-Small Scale Home based production Example:working out of your garage, supplying items for village (developing) Commercial Industry-Large Scale is factory based production Example: steel refinery, assembly lines, mass production

Primary Activity “Get Stuff” The 1st step  getting natural resources from the source Involves mining, farming, forestry Developing Nations (Lowest skill=Low GDP/Per Capita)

Secondary Activity “Make Stuff” The 2nd step  send raw materials to: Factories and Industry! Make something with the resource Newly Industrialized Nations (Mid Skill-Mid Range GDP Per Capita)

Tertiary Activity “Do Stuff” The 3rd step  send product to store They perform a service/do something for someone; accountants, lawyers, plumbers Developed Nations (High Skill Set High GDP Per Capita)

Quaternary Activity “Think Stuff” The 4th step  Take product and make it better! Involves research and development of products Cancer Research, NASA Engineers Developed (Highest skill-Highest GDP Per Capita)

Economic Systems! What type of economic system would have mostly this activity? Primary Traditional (based on tradition, culture and family) Secondary/Tertiary/Quaternary = Command/Communism (government control) Market/Free Enterprise (people control)

The Spectrum Some government interference Government owns many businesses Complete government ownership Free Market Economy Mixed Economy Socialist Economy

Reading Comparison Using your Communism vs Capitalism and Communism vs Socialism Handout. Read through the article. For each section find two points that compare the economic system being described.