Basic Economic Concepts Economic Systems

Goals Apply the three key economic questions to each economic system. Determine which of the 7 Broad Economic Goals are most important to each of the three primary economic systems.

I. 7 Broad Economic Goals Economic Growth Full Employment Steady growth in GDP Economic Growth Everyone who wants to work, is working Full Employment Prices stay relatively stable or no hyperinflation Price Stability Assurance of availability of goods Economic Security Businesses and individuals make all decisions Economic Freedom Making the most of resources Economic Efficiency Wealth is evenly distributed Economic Equity Have them get into pairs and rate the values in order from least important to most important

II. Key Economic Questions

III. Traditional Economies What to produce? What is needed for survival Ex. Food and shelter How to produce? Based on culture and practices that are passed on Ex. Fishing for food Who to produce for? Based on customs or traditions Ex. The community or deities https://www.youtube.com/watch?v=WEsDZx1U0Fc

IV. Market Economy Based on supply and demand What to produce? Based on supply and demand Ex. Pokémon is popular, so you will see more merchandise How to produce? Business decisions Ex. Manual labor vs. Machinery Who to produce for? Whomever will purchase the good or service Ex. Customers who are willing and able to pay http://yadayadayadaecon.com/clip/37/

V. Command Economies The government Ex. China’s steel production What to produce? The government Ex. China’s steel production How to produce? Ex. Russia’s production of glass Who to produce for? Ex. The government decides on the allocation of goods to the people http://economicsoftheoffice.com/all/?cha=Jim

VI. Mixed Economy Depends. Ex. Business owners decide their product. Economic Systems tend to be on a scale from command to market. VI. Mixed Economy What to produce? Depends. Ex. Business owners decide their product. Ex. Some products are outlawed. How to produce? Ex. Business owners are allowed to innovate production means. Ex. FDA and other organizations set parameters. Who to produce for? Ex. Business owners can sell most products to anyone. Ex. Laws prohibiting use of inappropriate products by minors. http://economicsoftheoffice.com/all/?cha=Jim

1. In a command economy The market dictates the answers to the fundamental economic questions. Competition helps answer the fundamental economic questions. State and local governments respond to the fundamental economic questions. The central government dictates the answers to the fundamental economic questions. Laws are set up to answer the fundamental economic questions. D

2. Market economies Rely on markets to coordinate economic activity. Rely on the government to address the fundamental economic questions. Rely on elected officials to make the most important economic decisions. Rely on courts to ensure people and firms to get what they deserve. Are more equitable than command economies. A

3. Compared to a command economy, a capitalist economy emphasizes Equity. Planning. Efficiency. Centralization. Human rights. C

4. Prices in capitalist economies are Unfair. Determined in competitive markets. Determined, in most cases, by the federal government. A reflection of our basic values. A means to achieve equality. B