Types of economies

HW check: RB, p 59 1 pie chart 2 bar chart 3 plan 4 flow chart 5 line chart 6 drawing / illustration 7 table 8 diagram

What is economy? The system by which a country's goods & services are produced and used. Problem? Concerning resources and wants... The resources are scarce and the wants are unlimited. The function of economy? To allocate scarce resources amongst unlimited wants.

To satisfy wants we need to answer three questions: What... How... For whom... should be produced? should it be produced? How these questions are answered will depend on the type of economic system.

The three basic types of economic systems: Market economies (or capitalist economies or free enterprise economies) Planned economies (or command economies) Mixed economies Take 2 min and brainstorm words you associate with each type – make lists

→ RB, p 17 Read the intro Read the text on market economies

Market economies Resources are allocated through _______ mechanism (supply and ________) System which stimulates _________

Competition in market economies leads to lower ______ (prices), better ______, more ______ for consumers

The role of the state in market economies: to _____ laws to provide _______ goods and services (e.g. j_ _ _ _ _ ary, national d_ _ _ _ ce, policing, fair competition)

Imperfections of market economies Private firms not interested in _______ that do not make profit. Public interest ____________ to achieve lower costs. _______ distribution of income.

→ RB, p 17 Read the text on planned economies

P lanned economies (or command economies) The role of the state - ____ The state: - organizes - plans - co-ordinates the whole _________ process

There is no competition... __________ goods Little ______ / choice for consumers The state _______ goods & services More ______ distribution of income

In planned economies... Production for _____ rather than profit People less motivated to work _________ The standard of living _____ than in other types of economies

→ RB, p 17 Read the text on mixed economies

Mixed economies Some resources _________ by the state (in the _____ sector), the rest by the market system ( ______ sector) Public sector: responsible for _______ goods & services Private sector: production decisions ______ by firms (demand for gods)

In mixed economies... ______ goods provided free The state ensures _____ competition Private goods & services allocated as in _____ economies. HW: RB, p 18

The role of the government: MK, U 22 (p 109) Do governments have too much power? Government involvement Government interventionin the economy Government interference be /get involved in intervene in interfere in / with Every act of government interference with business must indirectly affect consumption.

Additional reading for the ambitious Reasons for government intervention in the market

Which of the following activities could be left to the private sector in Croatia? Education Health care Low-income housing Defence The police, the justice system, prisons Public transport Social security (unemployment & sickness benefits, old age pensions) Working conditions (working hours, child labour...) Health, safety and cleanliness regulations Private sector (disciplines of the maket, deregulation)

Which of the following activities could be left to the private sector in Croatia? Education Health care Low-income housing Defence The police, the justice system, prisons Public transport Social security (unemployment & sickness benefits, old age pensions) Working conditions (working hours, child labour...) Health, safety and cleanliness regulations → RB, p 19 Private sector (disciplines of the maket, deregulation)

RB, p 19 Reading: The role of government

HW Reader, p 18: do exercises I – IV Don’t forget: Notes on RB, p 15 MacKenzie, pp read the extract from the Friedmans book FREE TO CHOOSE for a different perspective on the role of government & answer the questions

Optional HW (for extra credit): Prepare a short talk for next week (seminar) (100 words: intro, body, conclusion + phrases from pp 53-54) on one of the following topics: –a football / hockey / basketball... match –your hobby (dancing, chess, volunteering...) –why you are studying economics/business –is Kovač going to pull it off...