Discovering Economic Systems Copyright © 2011 Texas Education Agency. All rights reserved.

“No economy ever stands still.” Sir Roy Harrod, The British Economy http://www.yourdictionary.com/quotes/economy Copyright © 2011 Texas Education Agency. All rights reserved.

Student Expectation Compare and contrast the types of economic systems: Traditional economy Centrally-planned economy Market economy Mixed economy Texas Education Agency TEKS - - Principles of Business, Marketing & Finance 3 Copyright © 2011 Texas Education Agency. All rights reserved.

Traditional Economy An economic system in which people do things the way they have always done them. A traditional economy is influenced by: Habits Customs Religious beliefs 4 Copyright © 2011 Texas Education Agency. All rights reserved.

Traditional Economy Characteristics An economic system heavily influenced by habits, customs, and religious beliefs. Children generally “inherit” the occupations of their parents. Difficult to introduce new ideas. From Introduction to Business Copyright © 2011 Texas Education Agency. All rights reserved. 5

Planned Economy An economic system in which the government controls and regulates production, distribution, prices, etc. Copyright © 2011 Texas Education Agency. All rights reserved. 6

Planned Economy Characteristics Not affected by financial downturns and inflation. Deliberate planning of the entire money-making process for better results. Emphasizes more on collective benefits, rather the requirements of a single individual. http://www.economywatch.com/economy-articles/command-economy.html Copyright © 2011 Texas Education Agency. All rights reserved. 7

Market Economy A market economy is economy based on the division of labor which the prices of goods and services are determined in a price system set by supply and demand. Copyright © 2011 Texas Education Agency. All rights reserved. 8

Market Economy Characteristics Means of production are privately owned. Buyers and sellers are solely responsible for the choices they make. Free market economy is also characterized by free trade without any tariffs or subsidies imposed by the government. http://www.economywatch.com/economy-articles/command-economy.html Copyright © 2011 Texas Education Agency. All rights reserved. 9

Mixed Economy A mixed economy can be defined as a form of organization where the elements of both capitalist economy and socialist economy are found. Copyright © 2011 Texas Education Agency. All rights reserved. 10

Mixed Economy Characteristics Factors of production, distribution, and other types of economic activities are influenced and/or controlled by both private industry and governmental entities. Members of private industry compete with the objective of obtaining a profit. http://www.economywatch.com/world_economy/world-economic-indicators/mixed-economy.html Copyright © 2011 Texas Education Agency. All rights reserved. 11

Discovering Economic Systems Do you think that you understand? Test your memory. Complete Discovering Economic Systems Guided Practice. TRADITIONAL PLANNED MARKET MIXED An economic system heavily influenced by habits, customs, and religious beliefs. Government directly influences and vastly controls business practices due to ownership of natural and capital resources. Privately owned factors of production (i.e., factories and machines). Prices are influenced by supply and demand. An economic system that combines elements of all the other basic systems. Characterized by very low unemployment rate. Considered synonymous with a capitalistic economy. Individual freedom is limited (roles of individuals are static from generation to generation). Considered synonymous with either a communist or socialist economy depending upon the degree of government control. Individual’s purchasing decisions determines the types of products and services offered. Minimal government involvement in business transactions Activity and answer key are in the Microsoft Word document, Discovering Economic Systems. Copyright © 2011 Texas Education Agency. All rights reserved. 12

Discovering Economic Systems Practice makes perfect! The next activity proves that you understand. Click the hyperlink to test your knowledge: EconEd Student web page http://www.econedlink.org/lessons/index.php?lesson=EM322 Teacher web page http://www.econedlink.org/lessons/index.php?lesson=322&page=teacher The Comparative Worksheet link on the website is inoperable. Make copies of the worksheet found on pages 3 and 4 of the Microsoft Word Discovering Economic Types document. Copyright © 2011 Texas Education Agency. All rights reserved. 13

Discovering Economic Systems You be the expert! Discover economic systems worldwide. Complete Discovering Economic Systems Formal Assessment. Activity and rubric are in the Microsoft Word document, Discovering Economic Systems. Copyright © 2011 Texas Education Agency. All rights reserved. 14

Summary Review Name the four types of economic systems. What is the difference between traditional and planned economic systems? What is the difference between market and mixed economies? Most of the world’s countries have mixed economies. Why is that? Give an example of four countries’ economic system, one country for each economic type. 15 Copyright © 2011 Texas Education Agency. All rights reserved.

Resources Brown, Betty J., Clow, John E., & Brown, Kenneth W. (1995). Introduction to Business. New York: Glencoe/Mac-Graw Hill. market economy. (2009, December 24). In Wikipedia, The Free Encyclopedia. Retrieved 02:23, December 28, 2009, from http://en.wikipedia.org/w/index.php?title=Market_economy&oldid=333717399 planned economy. (n.d.). Dictionary.com Unabridged. Retrieved December 27, 2009, from Dictionary.com website: http://dictionary.reference.com/browse/planned economy economy. (n.d.). In Webster's New World Dictionary of Quotations. Retrieved December 28th, 2009, from http://www.yourdictionary.com/quotes/economy command economy. In Economywatch.com. Retrieved December 28th, 2009, from http://www.econedlink.org/lessons/index.php?lesson=EM322 mixed economy. In Economywatch.com. Retrieved December 28th, 2009, from http://www.economywatch.com/world_economy/world-economic-indicators/mixed-economy.html Comparative Economic Systems. In EconEdLink.org. Retrieved December 28th, 2009, from http://www.econedlink.org/lessons/index.php?lesson=EM322 16 Copyright © 2011 Texas Education Agency. All rights reserved.