Daily Warm up Question (use your Cornell Notes) Why are some countries rich and others poor? Look at the map and write a well thought out paragraph using examples from the map Low, Middle and High Income

Unit One: Learning Objectives: North Clackamas School District Social Studies Priority Standards: Econ 53. Describe characteristics of command, market, traditional, and mixed economies and how they affect jobs and standards of living. Econ 59. Demonstrate the skills and dispositions needed to be a critical consumer of information.

Lesson Three: Daily Learning Target A.I Can and explain in writing the three economic systems: Command Economies Traditional Economies Market Economies B. I Can and explain in writing the three Key questions for economic systems. WE WILL BE USING CORNELL NOTE TAKING FORMAT TODAY

The Three Key Questions for Economic Systems

Institutions, institutions, institutions The answer to our question seems to lie in the political and legal institutions of each nation –Rule of law—what you own depends not on force or who you know, but is protected by law that treat all persons equally –Private property rights—the rights to use and sell resources are clearly defined, cheaply enforceable, and fully transferable –Open markets—people are free to buy and sell when, where and to or from whom they wish, including citizens of other nations

Effects of institutions Secure property rights, rule of law, and open markets encourage people to make long term investments in human and physical capital –Education, buildings, innovation, land quality, infrastructure, etc –These investments raise the capital stock—both physical and human capital stocks –This in turn generates income over the long run, raising living standards and human well being

Key Assumptions in Economics People are rationally self-interested – They seek to maximize their utility People generally make decisions at the margin –They weigh the marginal benefit against the marginal cost of a decision

Three Economic Questions Every society must answer three economic questions… 1.WHAT? 2.HOW? 3.FOR WHOM? How that society answers the questions determines which type of economic system that society employs

WHAT TO PRODUCE? WHAT goods and services will be produced with the available resources?

Resources a.k.a. The Factors of Production Economists classify resources into 4 categories 1.Land Natural resources The payment for Land is RENT 2.Labor Human resources The payment for Labor is WAGES 3.Capital (a product of Investment) Tools, machines, factories The payment for Capital is INTEREST 4.Entrepreneurship The special ability of risk-takers to combine land, labor and capital in new ways in order to make profit The payment for Entrepreneurship is PROFIT

Check for Understanding Take Out a separate piece of paper you will turn in at the end of class 1. Now that you know these terms, let’s see if we can use them to solve sort these factors. At the top of a paper write Natural Resources, Human Resources and Capital Goods. Place these items under the correct heading. Delivery Truck Teacher* River Factory worker Tree* Bulldozer ATM machine Bushel of corn* Farmer River Hair stylist* Doctor Gold Barrel of oil Do we all agree on the placement of these items?

Factors cont’d Let’s consider some other questions about productive resources. 2. Are the factors interdependent? (In other words, do the factors affect one another?) 3. Land is considered a “passive” factor. Why? 4. How do capital and labor differ from land?

Answer Key Natural Resources Tree Bushel of corn River Gold Barrel of oil Human Resources Teacher Hair stylist Doctor Farmer Factory worker Capital Goods Delivery truck Factory ATM machine Bulldozer Tractor

HOW TO PRODUCE? HOW will the available resources be combined to produce goods and services?

FOR WHOM TO PRODUCE? WHOM will be the consumer of the product or service?

Three Economic Systems Command Economies Traditional Economies Market Economies

MARKET ECONOMIES Answer the key questions by a system of supply and demand. (in other words, it allows buyers and sellers to voluntarily exchange things) The ability of markets to coordinate economic activity is emphasized by Adam Smith in “The Wealth of Nations.” –This is what he referred to as the Invisible Hand

The Invisible Hand... every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

Invisible Hand What is Adam Smith basically saying with this passage? –If individuals are allowed to pursue their own self- interest, then the often times the result will be a more efficient economy. There is NO PLANNING 5. What do you think Adam Smith envisioned as the role of Government in the economy?

COMMAND ECONOMIES Answer the key questions through a central authority made up of an individual or a number of individuals who make the decisions of what to make, how to make it, and for whom things should be made. (Self-Interest and Competition are absent) –Communism –Socialism

TRADITIONAL ECONOMIES Answer the key questions by relying on past customs and practices: “The Inuit of northern Canada serve as a prime example of a traditional economy. For thousands of years, the Inuit parents have taught their children the survival skills needed to survive in the Arctic Circle's severe climate. The children are taught to fish, hunt, and make effective tools. Once learned, these skills are passed down to the next generation.”

Since it is cold most of the year the people could not become farmers so they were hunters and gatherers. Because food was scarce, they could not live in the same place all the time. They had to keep moving, following the herds. Of all the animals, the CARIBOU was the most important. It provided food and warm fur to make clothes. More than one hundred bird species nest during the summer, and many were hunted as well as sought out for their EGGS. Land animals also included musk ox, bears, wolves, wolverines, lynx, foxes, weasels, mink, rabbits, and many rodents. FISH, including salmon, trout, herring, halibut, and cod were prevalent and many Arctic peoples made use of them. DRYING MEAT Male (left), female (center), and male (right)

SEALS and WALRUS were the most important marine mammals. The Arctic Ocean supports nineteen whale species, numerous seal species, and walrus. The people developing specialized tools for sea mammal hunting throughout the Arctic. Because air-breathing seals need to break through the ice to reach air, they form breathing holes with their claws. Through these, hunters are able to capture seals. When the seal comes up, the hunter notices movement and uses his harpoon to capture the seal in the water.

They made WATERPROOF rain gear from the intestines of sea mammals. FUR for warmth was as prized as meat for food. They made ice-free mittens from polar bear fur. They used soft caribou skin to make tailored pants and shirts and boots. They had hooded coats. They put polar bear fur around the hood, again to keep ice away from their face. Ice does not STICK to polar bear fur.

The snow in the Arctic area can make a person unable to see. When the bright sun reflects back on white snow, it makes rays that are damaging to the eyes. These rays give the eyes a kind of sunburn. The people in this area learned how to protect their eyes by making SNOW GOGGLES. Arctic people have long made snow goggles to protect their eyes from SNOW BLINDNESS. They usually made them out of wood, bone, or shell. Today, Arctic people wear modern sunglasses or snow goggles often made with polarized lenses.

The type of homes depended on - (1) The kinds of MATERIALS they could find nearby. (2) The kind of WEATHER they had to shelter from. (3) How often they MOVED from place to place. In the summer they often lived in tent-like shelters made of caribou or seal hides with driftwood or whale bone frames. DRIFTWOOD is wood that has been washed onto a shore or beach of a sea, lake, or river by the action of winds, tides, or waves. IGLU is the Inuit word for a house or home. With a crawl-through door on the downhill side of the house the heat would naturally stay inside. HIDES DRIFTWOOD

While hunting out on the ice they would build IGLOOS as a temporary shelter. An IGLOO or snow house is a type of shelter built out of snow, originally built by the Inuit. CUT BLOCKSFORM A CIRCLE WITH BLOCKS BUILD UP WALLS, OVERLAPPING THE BLOCKS AND SHAPING THEM SO THAT THEY LEAN INWARD LAST BLOCK

Activity Need four volunteers… –Round 1: Part A: when I say go you can try and grab as many paper clips as possible…for every paper clip that you grab you will 1 m and m

Activity –Round 2: Part B: when I say go you can try and grab as many paper clips as possible from your section…for every paper clip that you grab you will get 1 m and m

Activity Discuss what just happened

Think: Where would you Place the U.S.? On a scale of 1 to 10 (1 being completely Command Economy & 10 being a Market Economy); where would you place the United States?

Now Write: Economic Spectrum 5. On a scale of 1 to 10 (1 being completely Command Economy & 10 being a Market Economy); where would you place the United States? Please explain why in a well crafted detailed paragraph. We will share out in table groups 1 10 The United States probably would lie around 7 and 8 In the United States we have what is known as a MIXED ECONOMY…in fact pretty much every country is a mixed economy combining aspects of command and market economies.

TANSTAA“F”L There Ain’t No Such Thing As A “FREE” Lunch NOTHING ON THIS EARTH IS FREE!!!!! EVERYTHING HAS A PRICE…IN THE EYES OF AN ECONOMIST!

Tomorrow TANSTAAFL Illustrated: The PPC The PPC = The Production Possibilities Curve The PPC = a graph showing all of the possible combinations of output for an economy fully employing all of its resources in producing 2 goods.

TANSTAAFL Illustrated: The PPC

INCOME (per week) $ $ CONSUMPTION (per week) Table of Values Construction of Econ Graphs CONSUMPTION (C) $ Vertical Axis

INCOME (per week) $ $ CONSUMPTION (per week) Table of Values Construction of Econ Graphs CONSUMPTION (C) INCOME (Y) $ Vertical Axis Horizontal Axis

Goals of Economic Systems Efficiency (maximize what you have) Freedom (ability to make choices) Security (goods/services will always be available) Equity (Fairness, Opportunity) Growth (Economy must grow with population; innovation)

Partner Practice-Econ Book-PPC Skim pages in the Economics book with a partner Answer questions 7-10 on page 18 Turn your answers into me Work on your “Dollar Tree” list