Basic Economic Systems Types of Economies in Countries of the World and How Governments Run Their Countries When it Comes to Resources (economics and money)

What is Economics ? Defined as the social science that describes and analyzes how people/society choose from resources and decides how to satisfied their wants and needs. There is no limit to the amount or kinds of things people want. The limits are based on the available resources and factors of production – what can be produced

Factors of Production ~ determines what can be produced ~ Natural Resources Land Capital Risk takers/entrepreneurs

The Basic Problem What goods and services are to be produced? In what quantities? How are they going to be produces? Who will receive and consume those goods and services?

4 Main Types of Economic Systems Command Economy Market Economy Mixed Economy Traditional Economy

Command Economy The government controls the economy It’s role is to run everything. All Resources are owned by the government Resources defined: The total means available for economic and political development and production profit Examples: raw material like minerals or oil, other assets like the labor force. How the resources are used is determined by the government

Command Economy Contd. People have no say in how things are ran. Example: former Soviet Union before it fell and was reorganized

Market Economy The government lets the economy be free and does not get much involved. It’s role is to let the economy be ran by the people. Most economic decisions are left up to individual consumers (people who buy things) and companies who make and sell products or provide services Examples: Nike, Walmart, carpenters, mechanics

Market Economy Contd. A free, private enterprise economy governed (ran) by the laws of supply and demand It permits an open exchange of goods (shoes, gas, house building, etc.) between those who make or provide the goods, and those who buy or use the goods. Example: The United States

Mixed Economy The government regulates the economy It’s role is to regulate but not control. It has some say but not all. A combination of command and market economic systems Market forces control most consumer goods (shoes, gas, construction, etc.), but government directs industry in need areas. Examples: farming, or healthcare Example: Canada

Traditional Economy An economic system in which economic decisions are made based on customs, beliefs, religion and habits. Advantages over other systems include: there is little friction among members because relatively little is disputed. Disadvantages include: It restricts individual initiative and has a lack of advanced goods, new technology, and growth.

Traditional Economy Contd. Used in the poorest areas of the world African tribes Was used by Native Americans Also found today in some parts of South America, Asia, and Africa. There, people still make clothing and shelter almost exactly the same way as they did in the past. Little is produced; there is little to go around.

Countries Have 1 of 3 Main Development Statuses Development Status defined: how well a country is built up economically and how well it takes care of its citizens. Highly Developed Developed Developing

Highly Developed Countries A country whose per capita income is very high by world standards. Many people have a good amount of money. Per capita income defined: the total national income divided by the total number of people in the nation Most people enjoy a high standard of living - live well, are healthy and fed. Life expectancy is longer

Highly Developed Countries Contd. The economy is strong and is highly technology diversified (many forms of) It has a high per capita gross domestic product (GDP). GDP defined: The total market value of all the goods and services produced within the borders of a nation during in a year.

Highly Developed Countries Contd. The government is stable. Health care is available to all citizens (although the same level of care may not be available to all citizens) Examples: Canada, The U.S.

Developed Countries A developed country has a relatively low standard of living compared to highly developed counties. People live less well, many struggle financially and don’t have much food, or well built homes. The government is stable and health care is available to most citizens. Depending on your social class and where you live (how easy it is to get to the care) Example: Mexico

Developing/Underdeveloped Countries A developing country has an extremely low standard of living. Most people are very poor and have little or no food, and very poor shelter. The government may be corrupt or non existent. Health care is not as available and many people are ill. Life expectancy is very low Examples: Zambia in Africa (many other small African countries), as well as many others all over the world

Life Expectancy is an Indicator of How Developed a Country is

Classification of Countries The terms First World, Second World, and Third World have been used to divide the nations of Earth into three broad categories. These terms are not used as much today, but you may see them occasionally.

First World Countries More economically advanced, and industrialized countries Often considered the westernized countries Highly Developed

First World Countries Contd. Characterized as having/being: Low birth and death rates Highly industrialized High average income Stable government Urban (city) populations Technology computers, advanced communications etc. Market economy Supply and demand Good class mobility People can make a better life for themselves

First World Countries

Second World Countries Developed countries More developed than 3rd world/developing countries but not as far along as 1st world Somewhat advanced, socialist countries with a planned economy and state control. The term has almost disappeared, and socialist countries are today attempting to develop free market economies and a degree of democratic government.

Second World Countries Contd. Characterized as having/being: Birth and death rates are dropping Average income is increasing Government becoming more stable Population is becoming urban Poor communication, outdated technology Command Economy Government ran, poor distribution of resources Little class mobility Small upper and middle class, large lower class

Third World/ Developing Countries The relatively "undeveloped" and predominantly poorer countries of Asia, Africa Latin America, and some in the Middle East The poorest nations of the world. Most are in debt to Western banks and governments or international lending organizations. Many depend on international aid to meet the basic needs of their population.

Third World Countries Contd. Characterized as having/being: Low levels of living, low-income per capita Little or no education programs Widespread poverty and starvation. Economies largely based on agriculture Often a high population growth High birth and death rates Unstable government Little or no technology Huge poor population, small rich population Traditional economy (little economic organization) or Command economy (government makes economic decisions)

Classification of Countries According to the Human Development Index Green = 1st world, Yellows/tans = 2nd world, Reds = 3rd world

The needs of 800 million people in the world are not being met. Why ?

Needs of the World 4 Main Reasons why many people in the world are not getting their basic needs met.

Reason 1 The country/nation these people live in does not have many resources.

Reason 2 The people in power (government) in the nation do not distribute the resources throughout the population. There are a few people who have control of all the resources = few rich people and many poor people.

Reason 3 Countries/nations rich with resources don’t always share their resources with those countries who need them.

Reason 4 There are not enough resources for all the people who live in the country/nation. Countries usually don’t have a variety of resources within the country There may be overpopulation.