Economic Goals and Three Fundamental Questions 1. How do societies choose goals for their economic system? 2. What are the 6 goals of a free market system? 3. Scarcity forces us to think about what three fundamental questions?

Societies choose different economic systems and different goals Goals based on values, collective judgments on what’s most important economically –What to accomplish? –What’s the end result?

Free Market Goals 1 & 2 ECONOMIC FREEDOM Minimal gov’t intervention Personal economic freedoms –Econ. Choices –Property ownership –Start businesses –Spend/save –Job choice ECON. EFFICIENCY Producing the most goods/services with limited resources High income based on skill of job Incentive to reduce waste, lower costs, increase profit Achieve best possible gov’t services (schools…)

Goals 3 & 4 ECON. SECURITY Some gov’t intervention prevents some from being exploited Protection against economic hardships, based on society’s decisions Funding provided by society for certain aid programs ECONOMIC EQUITY Difficult to define, deals with what people perceive as “fair” or “unfair” Which people are better/worse off in a system? Who gains/loses? Is there an equal opportunity for each person to participate/benefit from system?

Goals 5 & 6 Full Employment & Stable Prices Goal to achieve low unemployment Avoid raising prices for goods and services too high Price rise=more money to buy goods/services ECONOMIC GROWTH Standard of living— level of econ. well- being of people Necessary to provide more jobs and income for people

Three Fundamental Questions What to produce? –Requires economy to decide mix/amount of goods/services it will produce (make) –Due to scarcity, forces U.S. to feature consumer sovereignty How to produce it? –Economy must decide which combination of technology, resources to use in producing g/s –Will production be more/less capital intensive? –Education plays a key role in ability of workers to perform their jobs For whom to produce? –Economy must decide which people receive g/s—concerns economic equality –Society must have a method to decide who will be rich, who will be poor—this is price

Check yourself… 1. Why is the economic goal of security important when the economy experiences a downturn? 2. Why must a society answer the three basic economic questions?