 The question that each economy faces is whether they want prices, quantities, distribution of goods and services, and distribution of income to be determined by the private sector or the public sector.  Private sector – made up of consumers and businesses.  Public sector is the government. There are different levels of government : local, state and federal.  Some services are produced by both private and public agencies such as education, trash collection, and security.  The groups in the economy are consumers, businesses, and government.

PlayersGoalExamples ConsumersMaximize personal utility Some people maximize their utility (happiness) by purchasing material goods. Some people maximize their utility by giving away their time and money to charity/ missions. BusinessesMaximize long-run profit ne500/2011/performers/companies/profits/ Businesses maximize profit to make owners happy! GovernmentMaximize social welfare ment/Federal_Unemployment_Insurance Extensions.htm Government’s goal is to make the masses happy, not just one group of people or businesses.

 The answers to these questions will determine the type of economic system the economy will pursue.

 How much should the economy produce? It depends on the resources it has available The resources are land, labor, capital and entrepreneurial spirit. The goal is to use each of the resources efficiently.

 The Theory of Comparative Advantage  A society should produce goods and services that complement its competitive edge.  Corn is not grown in Alaska, but fisheries are prospering.

On the arable land, which is only 11% of Japan's total land area, the population density is among the highest in the world. 145,833 sq mi in Japan – 15,000 square miles of farmable land 9,600,000 square acres Census of Agriculture Contact NASS Customer Service, , 2002 and 2007 Census of Agriculture Approximate total land area (acres) 2,262,462,0202,263,960,5012,260,994,361 Total farmland (acres) 954,752,502938,279,056922,095,840 Percent of total land area 42.2%41.4%40.8% Cropland (acres)445,324,765434,164,946406,424,909 Percent of total farmland 46.6%46.3%44.1% Percent irrigated11.5%11.6%12.7%

 By the most efficient companies.  Sometimes by the government.  In a capitalistic system the best companies survive, the weaker companies go out of business.

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 In the US the top 20 percent of wages earners make 53 percent of the income.  The bottom 20 percent of the wage earners make 3.9 percent of the money.  In a Communist Society, theoretically every one would make the same amount. Their would be no rich or poor. Yet, there would also be no incentive to work hard because everyone makes the same amount.

CountryAgricultureIndustryService United States 0.9%20.4%78.6% South Korea3.3%40.7%56% Indonesia13.1 %46%41%

 Businesses change to earn profit. Cell phones have gotten smaller, batteries last longer, service has improved. Why? Because companies want to earn profit, and these qualities attract consumers!  Music is now played on an MP3 or I-pod.  Why? Because companies want to earn profit and these smaller units attract consumers.

Command governments determines prices and quantities produced Capitalistic free market interaction between buyers and sells determines prices and quantities produced Mixed a mix where in some markets the government is a buyer, regulator, or producer.  Even with a free market capitalist system there are times when the system does not operate in a manner that best suits the overall population. These occurrences are known as free market breakdowns. Some of these free market breakdowns are on the “Free Market Breakdown” page on the website.

 Some goods and services are produced by private companies.  Some goods and services are produced by the government.  The trend in the US is for more government. There are pros and cons of more government. The biggest cons are incentive to work and large deficits. The pros are stability and equality among citizens.

 8/03/government-spending-as- percentage-of.html 8/03/government-spending-as- percentage-of.html   king.aspx king.aspx Government percent of overall spending

 Free Market Breakdowns