Command vs. Market Economies, 1/25 WARM UP What is this picture saying about the differences between North and South Korea?

What are command and market economies? Command /centrally planned economies… Market economies…

North Korea and South Korea Korea was a unified country until the end of WW2 After the split, North Korea became a communist country with a command economy South Korea became a democratic republic with a market economy

South Korean Industries

North and South Korea North Korea South Korea GDP: $40 billion $1.268 trillion GDP per capita: $1.800 $31,220 Rank in Global Economy: 125 Rank in Global Economy: 15 North Korea Economy Explained South Korea Economy Explained HOW THE WORLD SEES NORTH KOREA

Send a letter across the DMZ Write a letter to your Korean counterpart about daily life in your country. Include Your job, overall happiness, your view of the government Questions about your neighbor’s country

Market Economies, 1/29 Warm Up Trace the story of the $5 bill from beginning to end in this situation: Where did that $5 bill come from? Where will it go? And after that? (Don’t copy Q, simply answer it in a complete sentence)

In your notebooks… COMMAND ECONOMIES MARKET ECONOMIES

Command Economies Centrally planned economy

Command Economies Government determines what, how and for whom things will be produced

Command Economies Who is Karl Marx and what did he have to do with Socialism and Communism?

Command Economies Today No pure command economies today modern telecommunications bringing about change

Command Economies Disadvantages central planners do not understand local conditions inefficient Shortages Few choices

Market Economies FEATURE 1 Private property rights protected by law Relationship between buyers and sellers organized in markets

Market Economies FEATURE 2: Laissez faire Capitalism Producers create goods according to demand some government involvement

Market Economies FEATURE 3: Voluntary Exchange in Markets Profit

Market Economies FEATURE 4: Competition According to Consumer sovereignty who controls what is produced? Competition checks producers and buyers

Market Economies FEATURE 5: Specialization How does specialization benefit consumers?

Market Economies Advantages Individuals free to make economic choices Political Freedom Profit rewards hard work

Hand over your paycheck punk! Market Economies Hand over your paycheck punk! Disadvantages Does not give security to sick or aged Businesses did not address problems caused by industrialization

That’s why America is freaking awesome. Mixed Economy A combination of pure and centrally planned economy The US is a mixed economy Government only steps in when needed but is mostly hands off OSHA, federal minimum wage, zoning

Market Economies KEY CONCEPTS Circular flow model illustrates how interactions occur in a market SEE PAGE 53

Circular Flow Model Product Market Firms Factor Market Households (this is just an economist’s fancy way of showing you that you earn money, spend money, and it’s all just a circle of life) Product Market Firms Factor Market Households

Circular Flow Model Homework Assignment Create a Circular Flow Model using your own example of economic activity (i.e. buying a new iPad) Must be colored Must be neat Worth 20 points DUE TOMORROW