On the notecard provided… Write how Steve Jobs was one of the great entrepreneurs of your lifetime.

Economic Systems Chapter 2

Answering the Three Economic Questions. Chapter 2 section 1 Answering the Three Economic Questions.

What goods and services should be produced? How should goods and services be produced? Who should get those goods or services?

Economic Systems Economic System – The method used by a society to produce and distribute goods and services. What are some different Economic systems?

Traditional Market Command Mixed

Making an economy Lets pretend that… A country’s economy has just collapsed. You were hired to rebuild their economy.

Persuasive Presentation You and your team of three will research an economic system. You will create a power point visual to show during your presentation. Answer the questions on the assignment sheet during the presentation. Sell me on your plan!

Laptops Take your assigned laptop Print to printer 308 Color copies to SHS media center One person at a time with the pass to retrieve color copies. When finished SHUT DOWN the laptops and plug them into the correct slot.

Economic Systems Traditional Economy – found in rural, lesser developed societies. Based on customs and traditions Little desire to change or to grow Lack of technology Lower standard of living

Inuit of Canada

Economic Systems Market Economy – Free market where individuals make the economic decisions. Law of Supply and Demand

Economic Systems Command Economies – A central government makes the economic decisions. A.K.A centrally planned economy Communism Usually imposed on people by a militant organization.

North Korea

Economic Systems Mixed Economies – A mixture of all other systems. Most developed countries are moving towards this.

Poster Project You and a partner will research an economic system. You will create a poster that visually shows required information. You will teach your system to groups that have been assigned the other economic systems.

Vocabulary Take a moment to write out the definitions of the bold terms within chapter 2. 20 points Level 3

Continue to work on your posters

Group Discussions or Group Presentations

DO NOW Relax, the desks are in a different formation, it is not the end of the world. Get your poster You have 10 minutes to finish up your posters. Check to see if ALL information is present and that your names are on it.

DO NOW Send your Power Point or Google Slides to me at steve.odonnell@wattsburg.org

Free Markets = Market Economy

Free Market (Market Economy) Economic systems that are based on “Voluntary exchanges”. Individuals answer the 3 economic questions. NO GOVERNMENT INTERFERENCE Illustrated in the Circular Flow Model

Resources Money Households Businesses Money Goods or Services

Circular Flow Model

Free Markets Self Regulating Self-Interest and Competition lead to economic decisions that benefit the people in the market place.

Free Markets Laissez Faire – The invisible hand controlling the market. People want it or don’t. Businesses that do not adapt fail. No government controls

Issues with Free Markets No checks or balances to protect peoples rights in the market place. No controls to ensure social benefits No Government controls to prevent market failure.

Command Economy

Characteristics of Market Economy Private Property Freedom of Choice Self- Interest Profit motive Markets and Prices Competition Limited Government Characteristics of Command Economy Public Ownership Centralized Decision Making Economic Planning Allocated by Government

Command Market Issues with this system Bureaucracy becomes too large Government ignores demand People have no incentives to work harder.

Mixed economies

Negatives of Mixed Leans towards government control Socialism can develop Regulations for regulations sake

Do now… Look over your notes and worksheet in preparation for a quiz.

Textbook Reading Read pages 44 – 50 Complete the vocabulary sheet Answer the questions on the backside of the vocabulary using information from the text.

American Free Enterprise

Free Enterprise People are given freedom to choose Government protects the rights of the people to make those choices. Basic Social Services are guaranteed by the government. Taxes are imposed on the people to fund these services.

Basic Principles Profit Motive Open Opportunity Economic Rights

Profit Motive Profit is a major incentive for both consumers and firms. Forces businesses take calculated risks. Encourages individuals to be more productive.

Open Opportunity Anyone can compete in the market place. Allows for economic mobility. Creates competition within the market. This drives down prices Improves the quality of products

Economic Rights Government provides… legal equality Private property Free contracts Voluntary exchange

How are our economic rights protected in our Constitution? Constitution Day How are our economic rights protected in our Constitution?

Answer on the notecard Give 2 characteristics of a Free enterprise system. List two ways that our Government protects our rights. Put in mesh when finished

Up ahead… Looking at an exam on THURSDAY of this week. Chapter 2 material

Public Goods and Externalities

Simulation Everyone should have 2 red cards and 2 black cards.

Simulation Each round you will turn 2 cards to the market. For every red card you keep you get $4. For every black card that the market gets EVERYONE will get $1 Ex: If 15 people turn in a black card everyone will get $15

What does this simulation show us about public goods?

Public Goods A shared good or service for which it would be impractical to make consumers pay individually and to exclude those who did not pay.

National Defense

Fire Protection

Police

Lighthouse?

Market Failure A situation where the free market does not distribute resources efficiently. Because there aren’t enough incentives for companies to build roads there would be none. This is when the Government steps in to introduce public goods.

Public Goods Two Key properties non-rivalry in consumption if I consume more, others do not need to consume less non-excludability you cannot prevent people from consuming the good free rider problem

How much of a public good should be produced? Mimic the market: produce up to the point where marginal benefit equals marginal cost examples: number of police on the street size of national defense force

Cost-Benefit Analysis when the choice is to produce or not produce

Externalities Definition: When the costs of producing or the benefits of consuming spill over to other people. Negative externalities Positive externalities

A Negative Externality: Pollution

Positive Externalities Education Innovative ideas Research

Creates Positive Externalities Limits Negative Externalities

Expand a bridge to decrease traffic congestion Educate youth and then you have a literate community

To prevent companies from making to much pollution they will impose a tax. To make driving conditions safer we have speed limits.

Discuss with a partner What does it mean that a public good has non excludability? What is Governments role in dealing with positive and negative externalities?

What thoughts come to mind when you think of Erie’s lower East side?

Dealing with the poor

Redistribution Programs Cash Transfers Temporary Assistance Social Security Unemployment Workers Compensation

Redistribution Programs In-kind Benefits – meant to improve living standards of a group. Free or reduced lunches Food Stamps Section 8 housing Free higher education

What would happen if we removed the previously listed services?

TEST ON THURSDAY