ECONOMIC UNDERSTANDINGS SS6E5 The student will analyze different economic systems.

Compare how traditional, command, and market economies answer the economic questions of to produce goods.

Economic system built on exchange and trade Traditional Economy Economic system built on exchange and trade (About 400 million people still use this method.

Some characteristics of a traditional economy include. . . subsistence farming (farming mostly to have food to eat) herding cattle; hunting and gathering often make their own clothing and tools. If there is more food than they need, they trade the extra for goods made by others.

Command Economy When the government determines what to produce, how to produce , and for whom to produce goods and services

Some characteristics of a command economy . . . where the supply and price of goods are controlled by the government Government planners decide which goods and services are produced and how they are distributed. The former Soviet Union was an example of a command economy.

An economy in which wages and prices are determined by supply and demand

A system which includes both ownership of businesses by citizens and some control by the government

Trade Barriers Quotas Tariff Embargo Government policy or regulation that restricts international trade like a . . . Tariff Embargo Quotas

A tariff is. . . tax placed on goods when they cross a national border Example – tax placed on stereo equipment shipped from China

Embargos Not allowing business dealings and trade with a certain country in order to isolate it and to punish its government Example – The United States refuses to trade with Communist countries like Cuba.

Quotas Sets a physical limit on the quantity of a good that can be imported into a country in a given period of time Example – a country might limit sugar imports to 50 tons per year

Four Factors of Production Land Labor Capital Entrepreneurship

Land / Natural Resources Naturally occurring substances that are considered valuable like minerals, coal, lumber, etc…

Human Capital/Labor Skills and knowledge Ability to perform labor

Capital Goods Objects or equipment used in the production of goods Includes factories, machinery, tools, equipment, technology and various buildings which are used to produce other products

Entrepreneurship Somebody who starts a new business Someone who gives money to for someone to start a new business Shark Tank: Young Entrepreneurs

Goods and Services Goods are items you can see and touch, such as a book, a pen, a folder etc… Services are provided for you by other people, such as a doctor, dentist, hair stylist, waiter, chef, etc…

All goods (items that are made) and services (acts people perform) produced within a country in a given period of time - usually a calendar year