The Mixed Economy Unit 3 Notes Standard 12.2: Students analyze the elements of America’s market economy in a global setting Standard 12.6: Students analyze issues of international trade and explain how the U.S. economy affects, and is affected by, economic forces beyond the U.S. borders. SWBAT: Describe and provide examples of the similarities and differences between a command, pure market and mixed economy

Warm-Up REVIEW: What are the THREE ECONOMIC QUESTIONS? List them Provide a summary **If you don’t remember, look at your notes from last unit or get a textbook and open to page 34.

Three Basic Econ Questions What to Produce??? How to Produce??? For Whom to Produce???

HOW TO PRODUCE??? For every economy, the goods are produced by private enterprise, the government, or a combination of both. Government OR Private Businesses

(Pure Centrally Planned Economy) GOVERNMENT =Command Economy (Pure Centrally Planned Economy) Government produces everything. All resources are government owned and production is coordinated by the central plans of government. PRIVATE ENTERPRISE =Pure Capitalistic (Pure Market Economy) Private enterprise produces everything. There is no government at all. BOTH = Mixed Capitalism (Mixed Economy) Combination of government and private enterprise

Stop, Drop, and Draw Draw one big circle map and write “The Three Different Economic Systems” as your subject Use a different color to symbolize each system draw two symbols for each system Create a legend to color code your symbols

Read about Pure Market Economies and Pure Centrally Planned Economies Read on pages 35-38 Create a tree map with and write about the weaknesses associated with each economic systems.

PME PCPE Difficult enforcing property rights Some people have few resources Some firms try to monopolize markets No public goods Externalities Consumers get low priority Little choice of freedom Central planning can be inefficient Resources owned by the State are sometimes wasted Environmental damage

PURE CAPITALISM (PME) PRIVATE ENTERPRISE PRODUCES EVERYTHING…meaning, INDIVIDUALS make the economic decisions…looking out for themselves and their families. Profit is the one and only motive Advantages: People have the freedom to choose, provides competition so consumers get the best Disadvantages: What happens to those that need help…the young, old, disabled…without the help of government?

COMMAND (PCPE) GOVERNMENT DECIDES HOW, AND PRODUCES EVERYTHING!!! Only a few countries today still have much of a command economy. (i.e.-North Korea, China) Advantages: ability to quickly reroute resources in case of emergencies [war], nationwide goals can be set Disadvantages: creates no incentive to work hard, lack of consumer choice, inefficient

Dear Abby… Dear Abby, I am the leader of a new country and our Parliament is in the middle of a heated debate on whether to design an economy that is primarily command-oriented or pure capitalistic-oriented. What should I advise our new Parliament members to do? And Why??? Sincerely, Confused Leader

Pure Capitalistic v. Command Double Bubble Map: Compare & Contrast Both a pure market economy and a pure centrally planned economy…come with problems. The economy we have in the U.S. is a mixed economy, which is a combination of both government involvement and private enterprise Create a double bubble map to show the similarities and differences between the two

What is the name of the economic system the similarities make up??

WHY DO YOU THINK MOST COUNTRIES TODAY ARE MIXED?? MIXED CAPITALISM BOTH GOVERNMENT AND PRIVATE ENTERPRISE Most countries today are mixed!!! (United States, Great Britain, Mexico, France, Canada, Italy, Japan, etc….and the list goes on and on) WHY DO YOU THINK MOST COUNTRIES TODAY ARE MIXED??

REVIEW: Advantages and Disadvantages On your paper, create a chart that lists the advantages and disadvantages of the three different economic systems. Advantages Disadvantages COMMAND “define it” PURE MIXED Think!!!

Review: Draw a tree map and place the following nations under the branch you think accurately represents its economy. United States, Mainland China, North Korea, Russia, Mexico

The U.S. Economy Today *Mixed Capitalism* Government Free Enterprise -- “The Market”

The Government’s Role There are 3 levels of government: a. Federal (National) b. State (50 Individual States) c. Local (thousands and thousands of cities/counties)

What Powers Does Our Gov’t Have? Collect Taxes ($$$) -money, money, money Provide Services -Medicare, Welfare, National Defense, etc… Issue Regulations -laws for you and me to follow for society’s general welfare

The Government -- continued By taxing, spending and regulating, a government is able to somewhat alter the answers to the 3 basic questions. What: Production can be based on govt demand: schools, road How: Government regulations can prevent the production of some goods and/or services Who: By taxing, the govt redistribute these funds to help the old and the poor The Government -- continued

The Market’s Role NOT THE GROCERY STORE!!! The term given to describe the exchange made between buyers and sellers Banks Stocks Wall St.

The Market By trading, buying, selling, Loaning and borrowing money and goods, buyers and sellers are able to somewhat alter the answers to the 3 basic questions. What: Production is largely based upon supply and demand: products, stocks, popularity How: Companies aim to produce goods and services in the most efficient way possible Who: Companies mainly target the large middle class. The Market

How the Market Works Efficiently??? Larger Market (more buyers and sellers) More Division of Labor More Opportunities to be Efficient More Opportunities to make a profit

Factory Activity Division of Labor

Draw the following table on your paper Rounds Yabba Dabba Do Books 1 2 3 4

Factory Activity Today you will work in teams of four You will make Yabba Dabba Dos Books I will show you how to make them: Take a piece of paper, cut it in half Fold it in fours Scarcity = Choices Paper clip it together When I say ‘TIME!’ – STOP, DROP, and PUT your hands on your head!!! Or I will confiscate your books. We will do 4 Rounds

Factory Directions – cont. I need some Floor Managers Your job is to count the books when the round is done, throw away their paper and give them their paper clips Your job is to make sure they are not cheating You can be picky – nicely folded, no tears, able to read writing If they don’t do a good job, you may subtract books

Workers You receive wages when you are productive Complete as many as you can in the time you have If you complain, you won’t get paid If low production, you won’t get paid If poor production, you won’t get paid

Group Discussion Questions What did you guys do? What was good about this? What was the drawback? How many people cheated? Why? Did you feel any loyalty to the company? Is what you did good or bad for the company?

Wrap Up: Individual Describe your contribution to your team. Which round was your team’s most productive? Why? What could your team have done differently to be more efficient? If this was your full time job, would you have any loyalty to the factory? Why or Why not? How could you get promoted at this factory?

If individuals are motivated by the ‘invisible hand’ (profit), the evolution of the market economy came into being by implementing the following principles!!! Division of labor Specialization Specialized capital Efficiency Allocation of resources Profit

Evolution of the Market Economy Division of Labor (people have specific tasks…think of the assembly line) Leads to Specialization (really good at one or a few products) Wants to become an expert in your good, so you develop specialized capital (good technology/tools) Leads to efficiency Allocate your resources (sell your goods) Leads to PROFIT!!! =>Look up each of these words for HW!

Homework: Section 2.3: Comparative Advantage (pp. 50-54) Key Terms: Absolute Advantage Law of Comparative Advantage Specialization Barter Money Division of Labor Questions 1-4 Read the handout on Specialization and answer questions 1-4 (minimum 1 pg.)