Chapter 2 Section 1: Economic Systems After taking PPT Slides, TSWBAT list and describe the 4 types of economies.

Three Economic Questions What goods and services should be produced? How should these goods and services be produced? Who consumes these goods and services? (who are we going to sell them to) How a country answers these three questions determines the type of economy a country will have.

Economic Goals of Societies 1. Economic Efficiency: making the most of resources 2. Economic Freedom: Freedom from government intervention in the production and distribution of goods and services (Holland) 3. Economic Security: Assurance that goods and services will be available, payments will be made on time, and a safety net will protect individuals in times of economic disaster (not the US)

Economic Goals of Societies ctd. 4. Economic Equality: Fair distribution of wealth (socialism) 5. Economic Growth and Innovation: Innovation leads to economic growth, and economic growth leads to a higher standard of living. (US) Other Goals: Societies pursue additional goals, such as environmental protection. These goals help societies determine what types of economic models that they want.

Types of Economies A. Traditional: economic activity is result of custom, ritual and habit B. Command economy: the central government makes all decisions about the production and consumption of goods and services. C. Free Market economy: economic decisions are made by individuals and profit motive. Mixed economies are systems that combine traditional and the free market with limited government intervention.

Closure for Section 1 list and explain the three economic questions and identify and describe the 4 types of economies.

Section 1: Free Market vs. Command Economy After taking PPT Notes, TSWBAT Compare and contrast free market and command economies, list their positives and negatives, and explain the two types of command economies.

Advantages of the Free Market

Economic Power Free Market Command Households and business firms use markets to exchange money and products. Households own the factors of production and consume goods and services. The government owns both land and capital. The government decides what to produce, how much to produce, and how much to charge.

Regulation Self-interest is the motivating force in the free market. Command Self-interest is the motivating force in the free market. Competition is the regulating force of the free market. “Invisible Hand” Government chooses what to produce, how to produce it, and who to sell it to.

Positives Educated people make decisions. Market Command Highest degree of economic freedom Wider variety of goods and services Most efficient economic system. Competition encourages innovation which encourages growth. Educated people make decisions. There is more money/resources for state projects.

Negatives Poor People are allowed to remain poor. Market Command Poor People are allowed to remain poor. Businesses are allowed to fail. Great Depression was caused partly by the free market. Poor-quality goods, shortages, and diminishing production. There is no individual or business profit motive.

Types of Command Economies Socialism: democratic means are used to distribute wealth evenly throughout a society. Communism: all economic and political power resting in the hands of the government.

The Former Soviet Union Soviet Agriculture In the Soviet Union, the government created large state-owned farms and collectives for most of the country’s agricultural production. Soviet Industry Soviet planners favored heavy-industry production (such as steel and machinery), over the production of consumer goods. Soviet Consumers Consumer goods in the Soviet Union were scarce and usually of poor quality.

Section 1 Closure Today you learned to compare and contrast free market and command economies, list their positives and negatives, and explain the two types of command economies.

Compare and Contrast Economies Chart

Chapter 2 Section 2: Mixed Economies After taking PPT Notes, TSWBAT Explain the limits of a totally free market economy, Explain the governments role in a mixed economy, and explain Free Enterprise.

Limits of Market Economies Market economies, with all their advantages, have certain drawbacks. Market Economies the government takes a complete laissez faire or “Hands off” approach. This approach leads to complete lack of regulation and evolves into a “cut-throat” economy.

Free Enterprise. An economic system that permits the conduct of business with minimal government intervention.

Ranges of Free Enterprise There is a ratio between government intervention and free market in modern economies. Some countries have more intervention and regulation, others are more free. Continuum of Mixed Economies Command Free market Source: 1999 Index of Economic Freedom, Bryan T. Johnson, Kim R. Holmes, and Melanie Kirkpatrick Iran North Korea Cuba China Russia Greece Peru United States South Africa France United Kingdom Botswana Canada Singapore Hong Kong

Mixed Economies In a mixed economy, Governments Roles in a Mixed economy: create laws protecting property rights enforcing contracts encourage innovation by granting patents But, businesses are free to fail and succeed

Government’s Role in a Mixed Economy Product market the government purchases goods and services in the product market, and Factor market purchases land, labor, and capital from households in the factor market.

Free Market Assignment Answer the three economic questions as you would in a totally free market economy. I want a visual that lists the three economic questions and has your answers. It also needs to have a Picture/Drawing. Use the any magazine or items from a store for inspiration. You will be presenting these at the end of class.

Chapter 2 Section 2 Closure List why a total free market economy cannot exist in the real world. , List the 3 roles of governments in a mixed economy, and list 2 countries that are close to free market and two countries that are close to Perfect competition.

Chapter 2 Section 3 TSWBAT list the reasons why there is a global transition to Capitalism.

Reasons for Capitalism Many countries have increased their productivity and have experienced exceptional economic growth. This growth has increased nearly everyone's standard of living within capitalistic countries. Loss of political power. The media and internet has enabled people from other countries aware of the wealth in capitalistic countries. Privatization- converting state owned factories to private ownership Vouchers- certificates for people to buy government owned property

Disadvantages to Capitalism Underestimated the cost During the Great Depression instability, unemployment and social unrest. Many of the countries in transition don’t have policies in place like we have now.

GDP per capita GDP per capita- Domestic product on a per person basis

Causes: Desire for consumer goods. Desire for increased wealth Effects: Privatization of state owned goods. People respond to new incentives Transitioning to Capitalism China Russia Latin America Eastern Europe

Countries and Regions in Transition Russia- 5 year plan was introduced by Stalin, coordinated growth by SU and China in agriculture and industry. Gosplan- central planning committee that directed 5 year plan Collectivization- forced common ownership in SU Perestroika- restructuring of SU economy by Gorbachev.

Countries and Regions in Transition China Great Leap Forward- China’s 2nd 5 year plan began in 1958 it forced collectivization. Today they are privatizing some industries and introducing market reforms. Today they are the 2nd largest economy in the world.

Vocabulary Nationalization- shifting private ownership to government ownership. Black market- market where goods and services are sold illegally. Solidarity- Polish labor union founded by Lech Walesa helped workers gain freedoms. European Union- association of European nations formed a common market with full economic and political cooperation. Keiretsu- independently owned group of Japanese firms joined and controlled by a board of directors in order to regulate competition.

Chapter 2 Section 3 Closure Quiz