World Economies Social Studies/Economics Robert Louis Martinez

Descriptive Overview: In this lesson, students will be exposed to four types of world economies. They will also learn the historical background that led to the formation of those economies, specifically command and mixed economies.

Lesson Objectives/Goals  Describe and compare the economic systems predominate in the world today.  Compare and contrast traditional, command and market economies.  Explain how mixed economies are a combination of other economic systems.

Adam Smith ( ) Smith is considered the father of capitalism and the free market theory. Smith believed that market production and prices were controlled by consumers (the Invisible Hand). Prices and production would increase or decrease depending on consumer demand. He believed that the government should not interfere with the economic market.

Laissez-Faire Economics  Based on the economic theory that government should not interfere in business and the economy. (hands-off.) Little or no regulation, restriction, or taxes.

Capitalism  Based on the private ownership of property and the exchange for profit of goods, labor, and money.

Socialism  A theory of social and economic organization based on the government control (sometimes ownership) of the factors of production and social services.

Karl Marx  Regarded as the father of communism and socialism.  He believed that capitalism would suppress the common peoples by placing the resources and wealth of production in the hands of the elite.  Marx proposed a ‘classless’ society, whereby all shared property and the factors of production were shared with no private property or ownership of industry.

Traditional Economies  Traditional economies are found in rural, non-developed countries  Some parts of Asia, Africa, South America and the Middle East have traditional economies  Customs govern the economic decisions that are made  Technology is not used in traditional economies.

Traditional Economies  Farming, hunting and gathering are done the same way as the generation before  Economic activities are usually centered toward the family or ethnic unit.  Men and Women are given different economic roles and tasks.  Subsistence Level economics and production.

Command Economies  The government or other central authority makes decisions and determines how resources will be used.  Change can occur relatively easily.  There is little individual freedom.  There is no competition.  Businesses are not run to create a profit.

Command Economies  Consumers have few chooses in the market place.  Factories are concerned with quotas.  Shortages are common because of poorly run factories and farms.  The government dictates the job in which you work.

Command Economies  The government sets the prices of goods and services.  Examples of command economies: Cuba, North Korea and the People’s Republic of China.

Market Economies  Resources are owned and controlled by individuals.  Economic decisions are made by individuals competing to earn profits.  Individual freedom is considered very important.  Economic decisions are made by the basic principals of supply and demand.  Profit is the motive for increasing work rather than quotas.

Market Economies  Also called capitalist economies.  There are many economic freedoms.  There is competition among businesses.  Competition determines price which increase the quality of the product.

Mixed Economies  Government and individuals share the decision making process.  Government guides and regulates production of goods and services offered.  Individuals own means of production.  Protects consumers and workers from unfair policies.  Most effective economy for providing goods and services.

Can you identify these four types of world economies?  Traditional Economies  Command Economies  Market Economies  Mixed Economies Review