Economic Systems General Business Pg 21-32

Key Economic Questions What goods and services are to be produced? How should the goods and services be produced? For whom should the goods and services be produced? What to produce: Nations differ in their wants just as individuals do. 1) Some might want to produce spaceships while other want to spend their money on military 2) Some countries might only have the resources to produce the basic needs of their people. (food, clothing and shelter) 3) Decisions must be made on which kinds of goods or services are valued the most and best serve the nation. How should the goods and services be produced? Based on the resources that are limited a country may use different methods to produce their goods and services. Example from the book: A country with little capital resources may use more people (human resources) to do the work. (build a road) A country with many capital resources (machines such as bulldozers) may use fewer people and more capital resources to build the roads. For whom to produce? Which citizens will benefit from the production of goods and services? Who’s needs and wants are most critical?

Types of Economic Systems Custom-based Economy Often in 3rd world countries or developing countries. The answers to the three economic questions are established by custom. Goods are produced the way they have always been produced… each generation follows the what they were taught as children.

Types of Economic Systems Direct (Planned) Economy Resources are owned and controlled by the government. Government answers the three economic questions. The officials of the government decide through committees what and how goods will be produced and how they will be shared. They decide: How much of the nations resources will be spent on military uses and how much will be used to produce consumer and capital goods. In some countries govt. leaders assign people to careers based largely on the leaders view of the needs for production. Freedom of the people is very limited.

Types of Economic Systems Market Economy Generally found in countries with democratic forms of government. Three questions are answered by the people. “Marketplace” - could be anywhere AKA Capitalism- meaning the economic resources are owned by the people, and not the govt.

So… which of these three do we live in? Custom-based Economy Direct (Planned) Economy Market Economy

In your notes… The American Economic System: This means that basic economic decisions are based on the actions of buyers and sellers in the market. FREE ENTERPRISE SYSTEM: The right to choose whether to own a business and the choice of the individual to decide what will be produced with the limited resources. The buyers and sellers (the people of the country) make the decisions with the choices we make with what we buy. Free Enterprise system allows us to answer the three economic questions

Finish reading and take notes on chapter 2 On your own… Finish reading and take notes on chapter 2 Begin on page 25 with “ Our Economic System” Homework: Increasing Your Business Vocabulary on page 33 Match the 13 terms with the definitions. Due- Friday at the beginning of the hour

Features of the US Market Economy Private Enterprise Free to fail or succeed Free to do things as you want . . . However some regulations Private Property Includes individuals and businesses Profit $ left from sales after subtracting all the costs Profit motive : desire to work hard and be creative The heart of the private enterprise

Features of the US Market Economy Competition The rivalry among businesses +improve products +offer better services +keep prices reasonable +innovate Freedom of Choice Rights that are individual and consumer What are some freedoms?

Ideas for thought? What’s the problems with each of the economic systems? Traditional Command Free Enterprise

Review Concepts Why are we called a mixed economy? What types of government regulations are in place to protect: Consumers Workers