+ Economic and Political Systems November 12, 2014

+ Economic Systems Economic System – the way a group of people produces, sells, and consumes goods and services Producer – makes stuff Seller – gets stuff to consumer Consumer – buys stuff Good – a product you can own Service – something done for you

+ The Way It’s Supposed to Work! The Consumers give money to the Producers and Distributors (sellers) for goods and services. The Producers and Distributors give money to the People for work and other resources. Everyone makes money and spends money!

+ Traditional Economy Based on skills passed down generations. Shoemaker parents have shoemaker kids, etc. People trade goods and services for goods and services. Example: Billy builds me a house, I farm his land while he builds it. Cannot work in large populations!

+ Market Economy (Capitalism) Business Owners: Anyone! Prices: Controlled by supply and demand As demand goes up, price goes up As supply goes down, prices goes up Completely based on competition Better products and better prices earn business

Imagine a town with 10 different lemonade stands, run by different kids…

+ Market Advantages/Disadvantages Advantage (A): Consumer gets best product and price, and Producer is rewarded. Disadvantage (D): Winners win, but losers lose. Taxes are higher since gov’t owns no business.

+ Command Economy (Communism) Business Owners: The Gov’t Prices: Controlled by the gov’t Government owns all companies, so they don’t compete with anyone. Government runs companies for good of society, providing jobs in return for profits to use on society.

Imagine a town with 10 lemonade stands, owned by the same people…

+ Command Advantages/Disadvantages Advantage (A): Everyone is equal, no winners and losers. Very low taxes. Disadvantage (D): No competition, high prices, low quality, people grow lazy.

Who cares if I don’t sell any lemonade? I’m still getting paid!!!!!!!!!

+ Mixed Economies Most economies today are mixed. People can own some businesses, gov’t owns and regulates others. Example: I can run a drug company, but gov’t regulates and approves my drugs. Example: I can run an airline, but gov’t runs security and controls flights.

+ Political Systems Political System – how a group maintains order with a government All groups need rules and people to enforce the rules, political systems set this up!

+ Democracy Democracy – system where power is held by the people Direct democracy – people control decisions directly Representative democracy – people elect others to control decisions

+ Monarchy – decisions made by king or queen, who is chosen based on birth Traditional monarchy – all power held by king or queen Constitutional monarchy – power of king or queen is limited and people get to vote

+ Dictatorship – one ruler controls by force, usually with support of an army Power usually taken by force Power usually lost by force

Democracy Monarchy Dictatorship