Economics Chapter 2: Economic Systems

Agenda for Today 3 rd Quarter Grades Chapter 2 Economic Systems Slide Show Homework –Paragraph and Wkst. Due Thursday (15 Points)

At the end of this lesson, you will either be a: Communist A capitalist Or Use the barter system

Objectives: At the end of this lesson you should be able to: Define and list characteristics of capitalism, communism/socialism, fascism State differences between a command and market economies

What three basic questions must all Economic Systems answer? What should we make? –Scarce resources –Must choose what to make and how much How should we make it? –By hand or by machine Who gets it? –Those with $ or evenly divided Who decides? –The village elders –The government –The consumer How we answer these questions is determined by our economic system

What is a traditional economy? Economy based on how ancestral custom answered basic economic questions Usually rural, small, communal Communal Characterized by the barter system Exchange of goods and services directly without the “middle man” of money Ex. Innuits

Agenda for Today Government Textbooks not turned in? Chapter 2 Economic Systems Slide Show Homework –Worksheet Due Thursday (10 Points)

Review Which type of resource is this? Is water a need or a want? Does Zach’s Hair salon provide a good or a service? What is the economic term for why a shore house is so expensive? What 4 economic questions must all societies ask themselves?

What is a command economy? Economic system in which government leaders answer the basic economic questions Characterized by –No competition between businesses –Planned economies Government planners distribute resources, labor, and capital Three Versions of Command Economy: –National socialism –Communism –Democratic Socialism

What is a national socialist economy? Command economic system that allows private ownership and profit –But Gov. directs economy Nazi Germany allowed companies to earn a profit but told them what to make Totalitarian dictatorship –Total government control of press, education, thought –No individual freedom Economic system of Nazi Germany

What is Democratic Socialism? Command economic system in which the government is democratically elected –Usually government owns major industries Communication systems, transportation systems, oil, utilities, education Education, healthcare are usually free Sometimes called a “welfare state” –Citizens enjoys free press, speech, religious freedom, ect. Examples: Sweden, Germany, UK, France

What is Communism? Economic system based on writings of Karl Marx –Command economic system in which government plans the economy and owns all means of production No profit No competition among businesses No private ownership of business Claims to eliminate poverty and stops exploitation of workers by owners –Totalitarian dictatorship –Total government control of press, education –No individual freedom USSR, Cuba, North Korea

What is a market economy? Economic system where people privately own businesses and consumers decide on what is produced Also known as –Capitalism –Free market Economic system of USA Based on the writings of Adam Smith –Said economy controlled by an “invisible hand”

What is the “Invisible Hand”? People make goods and services to earn money –Motivated to make a profit Consumers purchase the best goods and services –Business compete with each other This keeps prices low and allows the best goods and services to “win” Laissez-faire –Literally “let it be” –Smith believed that the government should let producers and consumers answer all economic questions

Does this poster support capitalism? Explain.