On the Index Card Write 3 things that you know about the word “Economy” Write 2 things that you know about the word “System” Write 1 thing that you know about the word “Resources”

Economic Systems SS6E5 The student will analyze different economic systems. Compare different types of economic systems: traditional, market, command and mixed.1 – what to produce, 2 – how to produce, and 3- for whom to produce. b. Explain how most countries have a mixed economy located on a continuum between pure and market and pure command. c. Compare the basic types of economic systems found in United Kingdom, Germany, and Russia.

Essential Question Write down this Essential Question: How do traditional, command, and market economies answer the economic questions of what to produce, how to produce, and for whom to produce?

What is Economics? Economics: Studies the choices of people trying to satisfy their wants in a world of scarcity Technology Land Oil & fuel Doctors

What are some things you want that are scarce?

Economic Questions Economic Systems determine three questions: WHAT goods will be produced? HOW will the goods be produced? FOR whom will the goods be produced? The way a society answers these questions determines the economic system

What is an ECONOMIC SYSTEM? The way a society answers WHAT goods will be produced, HOW will the goods be produced, and FOR whom will the goods be produced

Economic Systems determine three questions: WHAT TO PRODUCE? (What kinds of goods and services should be produced?) HOW TO PRODUCE? (What productive resources are used to produce goods and services?) FOR WHOM TO PRODUCE? (Who gets to have the goods and services?

Influences of Economy Growth Economic Resources Natural Resources – raw materials found in nature that are used to produce goods What are examples of some NATURAL RESOURCES? Human Resources – people’s knowledge, efforts, and skills used in their work What are examples of some HUMAN RESOURCES?

Influences of Economy Growth Economic Resources Capital Resources – used to produce goods and services (buildings, materials, and equipment) What are examples of some CAPTIAL RESOURCES? Entrepreneurial Resources - recognize the need for new goods or service What are examples of some ENTREPRENEURIAL RESOURCES? Scarcity – shortage of resources

Why Economic Systems? Nations use economic systems to determine how to use their limited resources effectively. Primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.

3 Basic types of Economic Systems 1. Traditional Economy 2. Market Economy (free enterprise) 3. Command Economy Mixed Economy - not considered an economy by itself; just a blending of two different types of systems

Traditional Economy The Old Way! Found in rural, under-developed countries– Inuits of Canada Pygmies of Congo Eskimos & Indian tribes Belarus

Traditional Economy Who decides what to produce? People follow their customs and make what their ancestors made Who decides how to produce goods & services? People grow & make things the same way that their ancestors did Who are the goods & services produced for? People in the village who need them

Traditional Economy The Old Way! Advantages: people have specific roles; security in the way things are done Disadvantages: Technology is not used; difficult to improve People will make what they always made & will do the same work their parents did

Market Economy (Free Enterprise) – The Get Rich Way! Who decides what to produce? Businesses base decisions on supply and demand and free enterprise (PRICE) Who decides how to produce goods and services? Businesses decide how to produce goods Who are the goods and services produced for? consumers

Market Economy (Free Enterprise) – The Get Rich Way! Also called a Free Market Economy or Free Enterprise Economy Businesses and consumers decide what they will produce and purchase and in what quantities Decisions are made according to law of supply & demand Supply and demand of goods and services determine what is produced and the price that will be charged.

Market Economy (Free Enterprise) – The Get Rich Way! Advantage—competition to have the best products and services Disadvantage—huge rift between wealthy and poor There are no truly pure Market economies, but the United States is close.

Command Economy – The Government Way! Who decides what to produce? Government (central authority) makes all economic decisions Who decides how to produce goods and services? Government decides how to make goods/services Who are the goods and services produced for? Whoever the government decides to give them to

Command Economy – The Government Way! Two types: Strong Command – where government makes all decisions (communism – China, Cuba) Moderate Command – where some form of private enterprise exists but the state owns major resources (socialism – France and Sweden) This system has not been very successful. More and more countries are abandoning it.

Command Economy – The Government Way! Governmental planning groups determine such things as the prices of goods and services as well as the wages of workers

Command Economy – The Government Way! Advantages Guarantees equal standard of living for everyone Less crime and poverty Needs are provided for through the government Disadvantages Minimal choices Fewer choices of items No incentive to produce better product or engage in entrepreneurship Also known as a Planned or Managed Economy

Mixed Economy – The Combined Way! Combination of a market and a command economy Most nations have a mixed economy: United States, England, Australia Government takes care of people’s needs Marketplace takes care of people’s wants

Mixed Economy – The Combined Way! Advantage—balance of needs and wants met by government and in marketplace Disadvantage—citizens have to pay taxes

Economic Continuum A line going from one extreme to the other extreme. % is based on how much of the economic system is market vs command. The higher the percentage = more economic freedom and the lower the percentage = less economic freedom Where are countries on the economic continuum? U.K Germany 79% 71% Russia O% 51% 100% PURE ______________________________________________ PURE COMMAND MARKET Cuba 28% Brazil 57% Canada 81%

Economic Continuum A line going from one extreme to the other extreme. % is based on how much of the economic system is market vs command. The higher the percentage = more economic freedom and the lower the percentage = less economic freedom Where are countries on the economic continuum? U.K Germany 79% 71% Russia O% 51% 100% PURE ______________________________________________ PURE COMMAND MARKET Cuba 28% Brazil 57% Canada 81%

Ticket Out the Door Index Card NAME!! 3- Basic Types of Economies 2- Examples of Mixed Economy 1-Define Economics