HW RB, p.14/VI 1 economic2 economic 3 economy4 economic 5 economical6 economic 7 economy8 economics 9 economical10 economy 11 economical12 economy 13 Economics15 economy 16 economic17 economist 18 economic19 economic - economy 20 economics21 economic 22 economise23 economic 24 economical25 economics 26 economists27 economise

TYPES OF ECONOMIC SYSTEMS

Economic system: An organized way in which a state or nation allocates its resources and apportions goods and services in the national community. To allocate To apportion Resources = To share out according to a plan = Anything that is used to produce goods and services

SOME BASIC PREMISES… Resources are limited/ scarce. Human wants exceed resources. The economy decides how to allocate scarce resources by answering some basic questions. ECONOMIC QUESTIONS → TYPE OF ECONOMY What to produce? How to produce? For whom to produce? MARKET ECONOMY PLANNED ECONOMY MIXED ECONOMY

Reading: RB, p. 30 Read the first two sections and fill in the first two columns in exercise II (p. 31).

M arket / capitalist /free-market econom ies Role of gov.: Limited (e.g., passes laws, provides essential goods & services, ensures fair competition) Ownership of resources: By private individuals. Allocation of resources: By the market mechanism (forces of supply & demand) Competition: Yes. Advantages: Competition → lower costs, wider choice of goods and services, better quality Disadvantages: Firms may sacrifice public interest for profit, lower costs and private interests, market imperfections unequal distribution of wealth

P lanned / command econom ies Role of gov.: Vital: owns resources, distributes goods and services, plans, organizes and co-ordinates production Ownership of resources: By the state Allocation of resources: By the state Competition: No. Advantages: more equal distribution of income and wealth, production for need, not profit Disadvantages: No competition  standardised goods of little variety and low quality, consumer choice is limited, low motivation to work standard of living is lower

Read “Mixed economies” Complete the table in exercise II.

Mixed economies: the public sector Role of gov.: Supplies some public goods and services free at point of use (paid for by taxes.) Ownership of resources: By the state Allocation of resources: By the state Competition: No. Advantages: The state provides a minimum standard of living for everyone (welfare state); Disadvantages: Not mentioned in the text.

Mixed economies: the private sector Role of gov.: Ensures fair competition. Some regulation of private sector businesses through laws. Private sector businesses also benefit from public goods and services. Ownership of resources: By individuals and businesses. Allocation of resources: Market system (market mechanism) Competition: Yes. Advantages: Not mentioned in the text. Disadvantages: Not mentioned in the text.

Look at the images and decide: Which characteristics of market and planned economies do the images illustrate? Why? Explain your answers using your notes.

Unequal distribution of income: Homelessness

Lower quality of products and standard of living

Unequal distribution of income: Large poor-rich gap A trailer A recreational vehicle (RV)

Little variety and choice for consumers

Sacrificing public interest in exchange for lower costs: Outsourcing

Unmotivated workers, standardisation

Sacrificing public interest in exchange for lower costs: Sweatshops

VERBS  NOUNS Allocate Plan Organise Co-ordinate Distribute Supply Command Compete Produce Allocation Plan Organisation Co-ordination Distribution Supply Command Competition Production