Economic Resources and Systems Chapter 2 day 2

Types of Economic Systems Market economy Command economy Mixed economy

Market Economy In a market economy, economic decisions are made in the marketplace according to the laws of supply and demand

Demand The amount or quantity of goods and services that consumers are willing to buy at various prices How many new release video games would you buy if each one costs…. $90? $45? $15?

Supply The amount of goods and services that producers will provide at various prices If you were a business owner, how many new release video games would you produce if you could sell them for… $90? $45? $15?

Equilibrium Price When the quantity demanded and the quantity supplied meet

Capitalism Private enterprise system Resources are privately owned You can own your own home Your own land Your own business Government control is minimal Primary role of government is to support the marketplace by removing obstacles such as trade barriers

Incentives Competition Profit motive Businesses compete for customers by producing better and cheaper products Constant demand for new goods and services encourages entrepreneurship Profit motive The desire to make more money Incentive to work harder and longer if you can make more money

Problem Owners and producers reap the most rewards. Unskilled workers and older adults are often unable to afford basic needs such as health care

The top 10 most Capitalistic countries are: Hong Kong Singapore New Zealand Australia Switzerland Canada Chile Estonia Ireland Mauritius

Command Economy Planned or managed economy A central authority, usually the government, makes the key economic decisions Communism State controls all the resources for the common good Socialism State owns major resources and makes key economic decisions However, individuals may own some businesses

Advantages Guarantees everyone an equal standard of living The state provides you with a job, a place to live, and health care Goods and services are distributed evenly

Disadvantages Little choice of what to buy Goods that aren’t considered necessities are not available Prices are fixed so there is no incentive to produce a better product Wages are fixed Doctors earn the same as an unskilled worker

Mixed Economy A combination of a market and command economy The state takes care of people’s needs while the market takes care of their wants The United States is said to have a mixed economy because privately owned businesses and government both play important roles.

Chapter 2 Classroom/Homework Fast Review Page 22 Questions 1-3 Fast Review Page 23 Fast Review Page 27 Using Business Key Words Page 30 Questions 1-13