ECONOMIC SYSTEMS Around the World

Learning Targets 4a. Understand the various forms of economic systems which exist in different societies and cultures throughout the world 4b. Describe the strengths and weakness of various forms of socio-political and economic systems, and their ability to meet basic human needs

What is an Economic System? How ppl, societies, or nations satisfy needs & wants of the people THROUGH Incentives, choices, allotment of resources

Why Economic Systems? 1)What to produce? 2)How to produce? 3)For whom to produce?

How are Economic Systems Organized? Who owns the resource? What decision making process is used to allocate the resources and products? What types of incentives?

Economic Resources Natural resources Human resources Capital resources Entrepreneurial resources Scarcity – shortage of resources

Four Types of Economic Systems TraditionalCommandMarketMixed  Transitional

Traditional Economy Traditional customs/beliefs govern economic decisions Farming, hunting, gathering, bartering Centered around local, family, ethnic units EX: villages in Africa & S. Amer., Inuit tribes in Canada, Aborigines in Australia

Traditional Economy Advantages Ppl have specific roles Security/certainty Sense of belonging Disadvantages No technology Resistant to change, improvement

Command Economy Command Economy Central gov’t makes decisions on “who, what, for whom” & determines how resources are used Public ownership (gov’t owns/operates industries & resources) Gov’t sets prices of goods & services, wages for workers Must meet set quotas EX: Cuba, North Korea, former Soviet Union, China

Command Economy Advantages Equal standard of living for everyone Needs provided through gov’t Can quickly organize shift in society’s resources & means of production Disadvantages Shortages common No individual choices in what is produced, how, & for whom No competition = no incentive to improve quality, prices No worker incentives

Market Economy “Laissez-faire” = let them do as they please W/out interference from gov’t Production & distribution are governed by supply & demand, self-interest Free enterprise (competition between companies) Most resources & industries owned by private citizens (private ownership) Individuals & businesses make decisions, not gov’t

Market Economy Advantages Competition for better quality, best prices Incentives for workers Economic freedoms & choice Disadvantages Huge rift between rich & poor Uncertainty in employment, production NO true market economies exist.

Mixed Economy Combination of command & market Gov’t & individuals share decisions Individuals own resources, means of production Businesses privately owned, supply & demand generally sets prices, but gov’t may regulate economy Gov’t can regulate production of certain goods, services offered, protects consumers/workers EX: Western Europe, U.S., Australia (Russia is moving towards a mixed economy)

Mixed Economy Advantages Balance of needs & wants Attempt to balance between rich and poor Assists those in need Fair competition? Disadvantages Gov’t regulation less efficient? Some limits on individuals

Transitional Economy Economy that is changing from command (planned) economy to market or mixed economy

Government Meets Economics Capitalism – Market or Mixed (econ. system) Some gov’t involvement (if mixed) Competition, individual ownership Socialism – Command or Mixed (econ. system) Still some capitalism More gov’t involvement More equal distribution of wealth Communism – Command (econ. & pol. system) Collective ownership of means of production and the services/goods produced No individual ownership or wealth

Global Economics Developed countries affect the developing countries What happens in a developing country can have an effect on developing countries