Economic Systems SS6E5 The student will analyze different economic systems. a. Compare different types of economic systems: traditional, market, command and mixed.1 – what to produce, 2 – how to produce, and 3- for whom to produce. b. Explain how most countries have a mixed economy located on a continuum between pure and market and pure command. c. Compare the basic types of economic systems found in United Kingdom, Germany, and Russia.

What is Economics? Economics studies how individuals and societies seek to satisfy needs and wants through incentives, choices, and allocation of scarce resources. Technology Land Oil & fuel Doctors

Factors of Production Economic Resources Natural Resources – raw materials found in nature that are used to produce goods Human Resources – people’s knowledge, efforts, and skills used in their work Capital Resources – used to produce goods and services (buildings, materials, and equipment) Entrepreneurial Resources - recognize the need for new goods or service Scarcity – shortage of resources

Why Economic Systems? Nations use economic systems to determine how to use their limited resources effectively. Primary goal of an economic system is to provide people with a minimum standard of living, or quality of life. Different types of Economic Systems Traditional Economy Market Economy (free enterprise) Command Economy Mixed Economy

Traditional Economy – The Old Way! Found in rural, under-developed countries– Inuits of Canada Pygmies of Congo Eskimos & Indian tribes Belarus Customs govern the economic decisions that are made Farming, hunting and gathering are done the same way as the generation before Economic activities are centered around the family or ethnic unit Men and women are given different economic roles and tasks Advantages: people have specific roles; security in the way things are done Disadvantages: Technology is not used; difficult to improve

Traditional Communities Native Americans Australia’s Aboriginal People Belarus traditional clothing Canada’s Inuit culture Africa’s traditional and tribal people

Market Economy (Free Enterprise) – The Get Rich Way! Supply and demand of goods and services determine what is produced and the price that will be charged. Advantage—competition to have the best products and services Disadvantage—huge rift between wealthy and poor Note: a true market economy does not exist. Also called a Free Market Economy or Free Enterprise Economy Businesses and consumers decide what they will produce and purchase and in what quantities Decisions are made according to law of supply & demand

Market Economies Businesses and consumers decide what will be produced, how it will be produced and for whom it will be produced? Lower levels of government ownership. Many economic decisions are based on supply and demand. Ex: Hong Kong, United States, Canada, United Kingdom, Mexico, and Germany.

Command Economy – The Government Way! The government (or central authority) determines what, how, and for whom goods and services are produced. Two types: Strong Command – where government makes all decisions (communism – China, Cuba) Moderate Command – where some form of private enterprise exists but the state owns major resources (socialism – France and Sweden) Advantages Guarantees equal standard of living for everyone Less crime and poverty Needs are provided for through the government Disadvantages Minimal choices Fewer choices of items No incentive to produce better product or engage in entrepreneurship Also known as a Planned or Managed Economy

Command Economies The government (or central authority) determines what, how, and for whom goods and services are produced. Ex: North Korea, Vietnam, Cuba, China, Saudi Arabia.

Mixed Economy – The Combined Way! Combination of a market and a command economy Government takes care of people’s needs Marketplace takes care of people’s wants. Most nations have a mixed economy: United States, England, Australia Advantage—balance of needs and wants met by government and in marketplace Disadvantage—citizens have to pay taxes

Continuum A line going from one extreme to the other extreme. Where are you on the wisdom continuum? Student FOOLISH------------------------------------------------------/\----------WISE Hong Kong Where are countries on the economic continuum? 90% United Kingdom Germany 79% 71% Russia O 51% 100 PURE ______________________________________________ PURE COMMAND MARKET