Economic Systems

Economic Systems SS6E5 The SWBAT analyze different economic systems IOT a. Compare traditional, command, market and mixed to determine what to produce, how to produce and for whom to produce? b. Explain why most countries have a mixed economy located on a continuum between pure command and pure market. c. Compare the basic types of economic systems found in the United Kingdom, Germany and Russia.

An economic system is the way a country decides w h o g e t s w h a t An economic system is the way a country decides w h o g e t s w h a t. What will we produce? How will we deliver it? Who will consume it? Here are four economic systems, or economies. Traditional Economy Command Economy Market Economy Mixed Economy

Traditional Economy We make what we need! Ivan and Olga are farmers in a traditional economy. They do things the same way their grandparents did. They produce goods and provide services that they consume themselves and share with their neighbors. The government is not involved. The Old Way.

Command Economy The government decides! The government owns the farm. The government tells Ivan and Olga what to grow, how to grow it, and how much to grow. A q u o t a is the amount they must produce. The government also owns the factories, and they are commanded to meet their quotas. The Government Way. North Korea is an example of a command economy. The government makes all decisions for the economy. Often more weapons are produced than food, the term for this Is “guns for butter” Who is the man in black?

Market Economy “Voluntary exchange” Is an economic goal that allows individuals to choose how much to consume, how much to save, how much to buy and sell. Let’s make some make money! Ivan and Olga’s son Leck owns the farm now, and he decides what to produce based on what will make the most money for him. The government stays out of it. He is free to produce what he predicts consumers will want. A market is where producers meet consumers. The Get Rich Way. South Korea, Taiwan, Singapore and Hong Kong have been nicknamed “The Gang of Four” because the countries successfully transitioned to market economies.

Continuum A continuum is a line connecting two extremes used to compare items in a group.   Where are you on the wisdom continuum? Student FOOLISH-----------------------------------------------------------------------------------/\------------------WISE

Mixed Economy Mixed Economy In a pure market economy, individuals and businesses make all the decisions. You would decide what to produce and how much to charge; I would decide whether to buy it. In a pure command economy, the government makes all the decisions. The Soviet Union was a command economy. The government decided who did what and who got what. Most countries are mixed, on a continuum between pure command economy and pure market economy; the government is involved in the market economy. How? The government pays money to help farmers when there is a drought. The government creates laws to make sure workers are safe. The government protects consumers from false advertising. The government makes it illegal to sell certain goods to children. The government restricts certain business activities, like drilling for oil.   Continuum of Economies USA -|------------------------------|-----------------------------------------------------------------|------------------|--- TOTAL Mixed, with Mixed, with TOTAL COMMAND more gov participation less gov participation FREE MARKET

Mixed Economy Continued All packaged food sold in the US must have this label. It gives information about the nutritional value of the food. Are businesses free to produce what the market wants? Yes. Sounds like a market economy. Does the government command businesses to use this label? Yes. Sounds like a command economy. It’s mixed: market economy with government regulation. You are free to produce, distribute, consume--but you have to follow the rules. The government wants you to start a business, create jobs, and make money. But the government also wants consumers--and workers--to be safe.

Exit Ticket! 1. Provide examples a country with traditional, command, or market economies. Write a statement to describe who decides what to produce, how to produce and for whom to produce?