Types of Economies

Economy The way that a nation makes economic choices that involves its resources Land – countryside/rivers/lakes Capital – money, investments Labor – people that work Entrepreneurship – business ownership

Scarcity Scarcity of resources makes everyone – nations, businesses, and people to have to make economic choices What are our economic Resources????

Role of the following in a private enterprise economy? Consumer – has limited resources: Choose what best meets needs and wants Producer – (Makes the product) Gathers information on what products and services the consumer wants Government – Usually no interference except if there is unfair treatment or something is dangerous

Basic Economic Questions What goods and services should be produced? How should the goods and services be produced? For what people (whom) should the goods and services be produced?

Three main types of mixed economies Capitalist model Socialist model Communist

Capitalist Model (Capitalism)/Free Enterprise Is an economic system characterized by private ownership of businesses and marketplace competition Also referred to as democracy

Components of capitalist model: Political power in hands of people More than one political party Freedom to vote for political candidates Government cares about its people – cares for those who cannot care for themselves

Capitalism The basic economic questions are answered? What to produce? The consumer How should goods be produced? Producer For whom? The consumer Examples of capitalist countries: U.S.A. and Japan

Components of socialist model: An increase in government involvement in people’s lives and economy Government tries to reduce difference between rich and poor Key industries run by government - Telecommunication, mining, transportation More social services – same standard of living; Medical care and education are free, even some college Cost: Taxes are higher (50%+)

Who answers the basic economic questions – Socialist Countries? What goods produced? – Consumer How should the goods and services be produced? – Producer For whom will the goods and services be produced? – Producer Examples of Socialist countries: Canada, Germany, Great Britain, Sweden, Australia

Communism Government runs and owns everything One political party All people who can work – assigned jobs Government decides type of schooling, where live Lack of freedom Everyone has place to live –based on need Medical care is free

Who answers the basic economic questions in Communist countries? What goods produced? Government How produced? Government For whom? Government Examples of communist countries Cuba and North Korea

Review In Cuba, the government answers all three basic economic questions. This would be an example of what economic system? A. capitalism B. socialism C. communism D. all of the above

Review The basic economic problem that all countries and businesses have to face about not having enough resources is called Regulation Environmental concerns Microeconomics scarcity

Review In this type of economy resources are owned by producers, producers produce because of the profit motive and individual customers decide what to buy: A. free enterprise (capitalist) B. socialist C. regulated D. communist

Review The three basic economic questions all economic governmental systems must ask about the goods and services they will produce are: A. who, what, when B. what, how, for whom C. who, how, where D. where, to, for

Review In a capitalist society, who answers the basic economic questions? A. consumers only. B. producers only. C. consumers and producers D. the government

Review In Sweden the government controls the key industries and there are many social services for the citizens. This is an example of A. capitalist (free enterprise) economy B. socialist economy C. regulated economy D. communist economy