Economic Systems UNIT ONE: BASIC ECONOMICS CONCEPTS

Bell Ringer  What type of economic system does the United States have?  What are some good and bad effects of this system that can be seen in our country?

Economic Systems!  Three economic questions: 1. What goods will be produced? 2. How will the goods be produced? 3. For whom will the goods be produced?

Major Economic Systems  Free enterprise  Individuals own resources and control the use of those resources  Also called capitalism or market economy!  Socialism  Government controls and owns many of the resources  Command economy is a specific type of socialism  Traditional  Traditions, customs and beliefs shape the goods and services produced by an economy

Bell Ringer  Take 5 minutes to study for your FIRST ECONOMICS QUIZ!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!  Write down the definitions for the following:  Scarcity  Opportunity Cost  Factors of Production  What does the PPC show?

Free Enterprise  Advantages  Encourages competition and quality goods  Incentives for individuals and businesses  Lower prices and more variety of goods/services  Disadvantages  Wealth gap—rich get richer while the poor get poorer  Large companies may monopolize markets  Competition for inexpensive goods may lead to exploitation of workers

Socialism/Command  Advantages  Wealth equality  Maximizes social welfare over individual profit  Disadvantages  Government isn’t omniscient—anticipating the needs of the public is nearly impossible  Lack of competition—no incentive for producers to be more efficient or produce high-quality goods

Traditional Economies  Advantages:  Most members of society have specific role in economy (cooperation)  More environmentally sustainable than modern economic systems  Disadvantages:  Vulnerable to weather changes and natural disasters  Vulnerable to more powerful market or command economies who may take or damage natural resources

Mixed Economies  Allow more freedom than command economies  EX: Possess the means of production, participate in managerial decisions, make decisions about labor and output  High level of state participation and spending  EX: Tax-funded libraries, schools, roads, utilities, welfare, social security  Various restrictions on business are made for the greater good  EX: Environmental regulation, labor regulation, antitrust and intellectual property laws

Mixed Economies  Advantages  Private competition encouraged  Protection of intellectual property (sometimes)  Social “safety net” programs  Disadvantages  Government directs resources toward social programs—not always efficient and often wasteful!  Government loopholes