Answer the following Three people are starting a new bakery in which they will be making cakes, decorating them, and delivering them to customers. Explain how they could use specialization and division of labor to make their business more productive.

Who gets the candy bar? I have one candy bar Talk to the people around you and come up with as many ways to allocate (distribute) the candy bar within the class. In other words, how will you decide who gets it?

Allocation Methods Command/By Need: The teacher or some other authority decides how things will be distributed. Majority Rule: The majority of a group decides how to distribute Game of Skill: Some form of competition Equal shares: Everyone gets the same amount. Lottery/Game of Chance: Pick numbers or names out of a hat to see who is chosen. First-come-first-served: If you are first in line, you will get the product. Prices: Buying or purchasing for money. (Those with enough money get the scarce good or service.)

How does society answer the three questions? Economic systems How does society answer the three questions?

Warm up What are the three economic questions that all societies must answer?

Economic Systems Web questions Go to http://www.shmoop.com/economic- systems/faq.html and read the basic information about the various economic systems Use the sheet I give you to answer the 15 questions using the information from the website When you are finished, turn your paper in (We will be moving on in 20 minutes so make a rational decision of how you use your time)

How do these systems answer the three questions? Let’s look at how each system answer the three basic economic questions Fill out the notes chart as we move through each system

Traditional Economic decisions repeat those that have been made in earlier times Each question is answered based on habit and custom Examples: Tribal societies, Inuit culture Does the U.S. have any traditional qualities?

Traditional Strength: Stability and Security – everyone knows their role Weakness: Stagnate, no growth, no innovation or invention

Command Economic decisions are made by the government and central government planners The government owns the resources Example: Communist countries – what, how and for whom are all decided by the government Does the U.S. have any command qualities?

Command Strength: Security and Equity— the basic needs of the people are met and there is an equal distribution of resources Weakness: No consumer choice, no freedom, lack of productivity

Market Decisions made by the people engaged in voluntary exchange Consumers decide what gets made Producers decide how it gets made Money (Prices) decides for whom it gets made

Market Strength: Variety of choices and products, economic freedom to choose Weakness: Some “fall through the cracks” – unemployment, homelessness, poverty

Point to remember Because we, and virtually all societies, have qualities of each of the systems, in reality, we are a MIXED ECONOMY.

Ticket out the door On the back of your chart are the descriptions of four different countries Read each description and decide which economic system is being described Put your answers on a sheet of paper and give it to me before you leave