Economic Systems Taught by Professor Coleman

Bellringer Producer Producer Product Product Market Market Consumer Consumer Define each term and give related examples for each term.

Answering the Three Economic Questions What is an Economic System? What is an Economic System? The method used by a society to produce and distribute goods and services. The method used by a society to produce and distribute goods and services.

Three Key Economic Questions What goods and services should be produced? How should these goods and services be produced? Who consumes these goods and services?

What Goods and Services Should Be Produced? Food & Shelter National Defense Education Public Health and Welfare Consumer Goods Each decision comes at an opportunity cost!

How Should Goods and Services Be Produced? All require land, labor, and capital All require land, labor, and capital Can be combined in different ways Can be combined in different ways

Who Consumes Goods and Services? Despite staggering output, quantities are not unlimited Despite staggering output, quantities are not unlimited How distribution is determined by how societies choose to distribute income How distribution is determined by how societies choose to distribute income Based on society’s unique combination of social values and goals Based on society’s unique combination of social values and goals

Categorize the following into land, labor, capital or n/a taxi cab taxi cab salesperson salesperson store owner store owner factory factory apple pie for your dessert apple pie for your dessert savings bond savings bond CEO of GM teacher school bus personal computer air tires river river slave slave flowers for your sweetie flowers for your sweetie a $10 bill a $10 bill forest forest wild boar wild boar

Economic Goals and Societal Values Economic Efficiency: maximize what you get for resources you have to work with Economic Efficiency: maximize what you get for resources you have to work with Economic Freedom: opportunity to make your own choices Economic Freedom: opportunity to make your own choices Economic Security and Predictability: knowing what we can get AND security of knowing help is available if we are old, poor, unemployed, etc. Economic Security and Predictability: knowing what we can get AND security of knowing help is available if we are old, poor, unemployed, etc.

Economic Goals and Societal Values Economic Equity: best way to divide its economic pie (i.e. equal pay for equal work) Economic Equity: best way to divide its economic pie (i.e. equal pay for equal work) Economic Growth and Innovation: improve standard of living Economic Growth and Innovation: improve standard of living Additional Goals: environmental protection, full employment, universal medical care Additional Goals: environmental protection, full employment, universal medical care

Economies and Values Traditional Relies on habit, custom, or ritual Relatively small and close Revolves around family Few mechanisms in place to deal with environmental disaster Resists change Market Decisions made by individuals Based on exchange or trade Also called free markets or capitalism

Economies and Values Command Centrally planned Government decides how to answer 3 economic questions Mixed Most modern economies are mixed Market-based Government plays limited role

Activity Applying Economic Concepts, pg. 27, #6

Section 1 Assessment Activity Create a poster that explains the three key economic questions and the basic economic goals. Create a poster that explains the three key economic questions and the basic economic goals. Posters should include both words and illustrations to clarify concept. Posters should include both words and illustrations to clarify concept.

Bellringer What comes to mind when you hear the term self- interest ? What comes to mind when you hear the term self- interest ?

The Free Market Market: an arrangement that allows buyers and sellers to exchange things

Why Markets Exist Specialization Concentration of the productive efforts of individuals and firms on a limited number of activities Leads to efficient use of resources Easier to learn one task or a few very well than to learn them all Buying and Selling Sell what we make Buy what we want

Activity Write a brief paragraph that explains why markets exist, giving real-life examples of the reason provided. Write a brief paragraph that explains why markets exist, giving real-life examples of the reason provided.Example: An example of the reason “ people are not self-sufficient ” would be “ I cannot grow all of my own food ”

Free Market Economy Households and Firms Households own the factors of production Firms use resources to produce a product, then sell them Factor Market Arena of exchange Firms purchase or rent land Hire workers, pay wages for labor Borrow money from households to purchase capital Profit is made

Free Market Economy Product Market Where goods and services are purchased by households See Figure 2.3 on pg. 30

The Self-Regulating Nature of the Marketplace Self-Interest: consumers personal gain Self-Interest: consumers personal gain Competition: looking for lower prices Competition: looking for lower prices The Invisible Hand: consumers getting what they want at prices closely reflecting cost—without direction. The Invisible Hand: consumers getting what they want at prices closely reflecting cost—without direction.

Bellringer, February 3rd List the 3 Market Regulators

Advantages of the Free Market Economic Efficiency Economic Efficiency Economic Freedom Economic Freedom Economic Growth Economic Growth Wider variety of goods and services Wider variety of goods and services

Section 2 Assessment Key Terms and Main Ideas, pg. 32, 1-7 Key Terms and Main Ideas, pg. 32, 1-7

Bellringer Imagine you are workers with guaranteed jobs in a centrally planned economy. Imagine you are workers with guaranteed jobs in a centrally planned economy. How deeply committed would you be to efficiency, quality, and innovation? How deeply committed would you be to efficiency, quality, and innovation?

Centrally Planned Economies Oppose private property, free market pricing, competition, and consumer choice Oppose private property, free market pricing, competition, and consumer choice

How Is a Centrally Planned Economy Organized? Government Control of Factor Resources & Production Government owns both land and capital Controls where individuals work and what wages they are paid Socialism and Communism Socialism: democratic means should be used to distribute wealth evenly through society Communism: all economic and political power rests in hands of central government They are authoritarian: strict obedience from citizens

The Former Soviet Union Soviet Agriculture Collectives: large farms leased from the state to groups of peasant farmers Soviet Industry State owned Favored defense, space program, and heavy industry (chemical, steel, heavy machinery manufacturing) Soviet Consumers “we pretend to work, they pretend to pay us” “we pretend to work, they pretend to pay us”

Problems of Centrally Planned Economies Poor quality Serious shortages of nonpriority goods and services Diminishing production Their performance almost always falls short of the ideals upon which the system is built

Section 3 Assessment Find images of the Soviet Union from the 1940s through the 1990s. Find images of the Soviet Union from the 1940s through the 1990s. Depict the standard of living, agriculture, heavy industry, medicine, science and technology, and so on. Depict the standard of living, agriculture, heavy industry, medicine, science and technology, and so on. Assemble images into PowerPoint. Assemble images into PowerPoint. Share next class meeting Share next class meeting

Bellringer How would you feel if you had to pay a monthly book-rental fee at the public library or buy a ticket to use I-240/I-40/I-55? How would you feel if you had to pay a monthly book-rental fee at the public library or buy a ticket to use I-240/I-40/I-55?

Vocabulary Matching Activity Laissez faire Laissez faire Private property Private property Free enterprise Free enterprise Continuum Continuum Transition Transition Privatize Privatize Private/corporate ownership of capital goods/investments determined by private decision Property owned by individuals Property owned by individuals Period of change in which an economy moves away from centrally planned to market-based Period of change in which an economy moves away from centrally planned to market-based Range with no clear divisions Range with no clear divisions Government should generally not intervene in the marketplace Government should generally not intervene in the marketplace To sell state-run firms to individuals To sell state-run firms to individuals

The Rise of Mixed Economies Video: "White Nerds Attempting to Rap on Mixed Economy” Video: "White Nerds Attempting to Rap on Mixed Economy”"White Nerds Attempting to Rap on Mixed Economy”"White Nerds Attempting to Rap on Mixed Economy”

Chapter 2 Assessment Visit Chapter 2 Self-Test Visit Chapter 2 Self-Test Web Code: mna-1021 Web Code: mna-1021