Chapter Two: Economic Systems & Decision Making Warm Up Question: (write answer in notebook with today’s date) What are the Three Basic Questions of Economics?

Unit I: Basic Principles of Economics What do we call the place where buyers and sellers come together? This concept is a vital aspect to our economic system. It allows the free exchange of g&s and the producers and consumers have the power.

Unit I: Basic Principles of Economics ECONOMIC SYSTEM: an organized process to DECIDE how to use SCARCE RESOURCES to satisfy needs and wants. 3 Types of Economic Systems: TRADITIONAL Economy: COMMAND Economy: MARKET Economy: What do each of these words mean to you? Brainstorm with group

Move to a clean sheet in notebook: we need to make a table ECONOMIC SYSTEMS heading MARKET COMMAND TRADITIONAL Make it for the whole page; we will add in the rows as we go along together and then in groups!!

Unit I: Basic Principles of Economics MARKET Economy Command Economy TRAD- ITIONAL Economy The past dictates, customs decide WHO answers the 3 BASIC QUESTIONS? Consumers & Producers decide Gov’t Decides

Unit I: Basic Principles of Economics MARKET Economy Command Economy TRAD- ITIONAL Economy WHERE do these systems exist in the world? USA, Canada, Japan, most of Europe Inuit (Eskimo), Aboriginal (Australia), African & Amish Villages Cuba, China, N.Korea

Unit I: Basic Principles of Economics MARKET Economy Command Economy TRAD- ITIONAL Economy PAGE 33 ADVANTAGES Split Rest of Table for 2 last rows DIS- ADVANTAGES

Traditional Economy Advant ages Dis- advant ages Always KNOW ROLE in society STABLE and predictable life BASIC NEEDS provided Dis- advant ages LOWER STANDARD of living WANTS are not met NEW IDEAS discouraged LACK of progress, NO CHANGE

Command Economy Advant ages Dis- advant ages Always KNOW ROLE in society Capable of DRAMATIC change BASIC NEEDS provided Dis- advant ages Has LITTLE FLEXIBILITY to deal with small day- to-day changes NEW IDEAS discouraged Requires large GOVERNMENT WANTS are not met NO INCENTIVES to get people to work

Market Economy Advant ages Dis- advant ages Decentralized decision making; bottom up Able to ADJUST TO CHANGE gradually Incredible VARIETY of g&s; many choices Lots of FREEDOM & CHOICE (jobs, g&s) LACK of GOVERNMENT interference High degree of CONSUMER SATISFACTION Dis- advant ages People face UNCERTAINTY & FAILURE Does not meet NEEDS of PEOPLE (homeless, hungry, uneducated) Rewards only productive resources Must guard against market failure

Group Activity ~ Relay Can you decipher what the advantages and disadvantages of each of these systems would be? Let’s see if you can work through it!!