BIG IDEAS = Responsibility, Choices, Changes, and Relationships 2 Economic Systems BIG IDEAS = Responsibility, Choices, Changes, and Relationships Essential Questions: How do societies provide for people in a traditional, command and market economy? How do the characteristics of a modified free enterprise/capitalism work in the US? What economic goals affect the roles of government, consumers, and entrepreneurs in the US economy? * Remember you are responsible for answering one of these essential questions at the end of this chapter as an assessment. Why it matters Understand: Economic systems govern WHAT goods and services to produce, HOW to produce them and for WHOM to produce them. The US basic economic decisions are made through the free interactions of individuals looking out for their best interests.

LEARNING GOALS: Explain why every society has an economic system to allocate goods and services. Explain the advantages and disadvantages of all economic systems. (T,C,M and C,S,C) Describe the characteristics of free enterprise. Describe the roles of government, consumers and entrepreneurs play and the goals in free enterprise capitalism. What you need to Do and Be Skilled at: Read, comprehend, and summarize key information from text collaboratively. Identifying and providing examples of various economies with real world applications. (T,C,M and C,S,C) Illustrating and explaining economic systems and key concepts within the world and a block buster movie.

Enter Lesson #1 Vocabulary KNOW 9 Vocab words economic system traditional economy command economy market economy market capitalism mixed economy socialism communism

Economic Systems All societies use an economic system to provide for needs and wants of their people. Three major economic systems exist: Traditional Command Market Most economies combine all 3.

Traditional Economies Traditional economies use ritual, habit, or customs to answer the basic questions of WHAT, HOW, and FOR WHOM to produce. A traditional economy—use of scarce resources and economic activity is based on habit or custom. Advantages Disadvantages

Command Economies Command economies rely on a central authority to make most of the economic decisions. A central authority makes the major decisions in a command economy. Advantages Disadvantages

Market Economies In a market economy, consumers and businesses answer the questions of WHAT, HOW, and FOR WHOM to produce. A market economy allows people to make decisions in their own best interest. Buyers and sellers exchange goods and services in a market. Market economies are based on capitalism, which means that the factors of production (C, E, L, L) are privately owned.

Market Economies (cont.) Advantages Disadvantages Exit Lesson #1

Enter Lesson #2 Mixed Economies Most economies in the world feature some mix of traditional, command, and market economies. Most economies in the world are mixed economies. When political systems are considered with economic systems, the picture gets more complicated. An example is socialism and its extreme, communism. The type of political system in a mixed economy is less important than the way basic economic decisions are made.

Mixed Economies (cont.) Advantages of a mixed economy Disadvantages of a mixed economy

Economic and Social Goals of the US Economy Government, entrepreneurs, and consumers share different goals in the US economy. (E5 EP) Economic efficiency = Economic equity = Economic security = Economic growth = Economic freedom = Full employment = Price stability =

Economic and Social Goals In the United States, we share several economic and social goals. Do we lower taxes to let business & individuals make more money to buy more goods & services? Do we raise taxes & use it to help new businesses grow & increase jobs? Businesses want more economic growth & economic efficiency Elderly & lower income workers want more economic security & economic equity EXIT LESSON #2

Enter Lesson #3 Vocabulary KNOW 8 Vocab words free enterprise voluntary exchange private property rights profit profit motive competition consumer sovereignty mixed or modified free enterprise economy

American Free Enterprise Characteristics of the US Economy In many parts of the world, capitalism has become the economic choice Capitalism allows private citizens to own and use the factors of production to generate profits The U.S. economy is based on free enterprise Capitalism and free enterprise are often used interchangeably, although meanings are different. Capitalism stands for the private ownership of resources Free enterprise is the unhindered use of privately owned resources to earn profits

Characteristics of Free Enterprise Capitalism The US economy has 5 major characteristics of a free enterprise economy. (C, E, P, P, V) Competition = Economic freedom = Private property rights = Profit motive = Voluntary exchange =

The Role of the Entrepreneur Entrepreneurs are the driving force of the free enterprise system. They: Entrepreneurs are both the spark plug & the catalyst of the free enterprise economy. Their search for profits leads to a chain of events that brings: New products Greater competition More production Higher quality Lower prices for consumers

The Role of the Consumer The economy in the United States adapts to consumers wants.

The Role of the Government The economic role of the U.S. government is decided by its citizens. The role of government stems from the desires, goals, and aspirations of its citizens. Government has become a: __________, __________, __________, and a __________ In general, the role of government in the economy is justified whenever _________________________________________. An unintended consequence of government’s role is the emergence of the mixed or modified free enterprise economy. Some people prefer to have no government involvement in the economy—which is not possible. Services like a national defense & a system of laws & justice cannot be supplied by the private sector alone. EXIT LESSON #3