1. ECONOMIC SYSTEMS Business Management

2. Today’s Objective  Compare economic systems, free markets, and economic-political systems  3 major economic systems  3 economic-political systems  Consider societal impacts and long- range prospects of each system.

3. Economic systems are determined based on the three economic questions. Economic Questions

4. The Economic Questions  Each nation must answer these questions when deciding how to use their limited resources.  The way the questions are answered defines the nation’s economic system. 1. What goods and services should be produced? 2. How should those goods and services be produced? 3. For whom should the goods and services be produced?

5. Economic Systems Economists classify economic systems into three categories:  Market Economies  Command Economies  Mixed Economies

6. MARKET Economies  Individuals own the means of production.  There is NO government involvement.  Businesses compete for customers.

7. Market Economies  What: consumers decide what will be produced by the purchases they make  How: companies find the most efficient means of production to increase profits  For Whom: the people with purchasing power

8. Are there any pure market economies in the world today? Think About It…

9. Market Economies Today  Prices would be freely set based entirely on laws of supply & demand  No such thing!  Term used to describe economies largely dictated by market forces

10. COMMAND Economies  All economic decisions are made by the country’s government.  Wealth is shared equally among all to ensure everyone’s basic needs are met.

11. Command Economies  What: one person (usually a dictator) decides what will be produced  How: resources are owned and controlled by the government  For Whom: government decides who will get which products

12. Are there any pure command economies in the world today? Think About It

13.  NO economy is purely any one economic system.  Mixed economies have government-operated or government- regulated enterprises combined with individually owned enterprises.  The United States is a mixed economy with strong characteristics of a market economy.  Government has some involvement in business  Government influence is limited by laws and regulations MIXED Economies

14. Nations today typically follow one of three different economic-political systems. 1. Capitalism 2. Communism 3. Socialism Mixed Economies

15.  Characterized by:  Marketplace competition  Private ownership of business  Role of Government  Support the people  Take care of those that cannot care for themselves Capitalism

16.  Private Property  Profit  Price Determination (set your own)  Competition  Distribution of Income Characteristics of Capitalism

17.  Because capitalism is a mixed economy, we have some government- regulated industries.  What are some of our government- regulated industries?  Capitalism is also characterized by private ownership. Businesses are free to compete without government interference.  Think of an example of two businesses that are competitors against each other. Think About It…

18.  The U.S. economy is primarily characterized by capitalism but also has some elements of socialism.  Most decisions are left to private business & consumer choices  The government provides public enterprise, like defense, education, aid for low-income, social security, etc. Consider the U.S.

19.  Characterized by: TOTAL government control  In theory, this ensures everyone will be equal.  In reality, there is nothing to drive people to better themselves or to work hard.  Examples: North Korea, Cuba, China Communism

20. Let’s Look at China  China’s economic-political system is frequently referred to as a socialist market economy.  Key industries are government owned.  Prices are allowed to fluctuate based on the market.

21.  Similar to capitalism, but with greater government involvement  More social services  Higher taxes to pay for gov’t services  Key industries are government-run  Examples: Canada, Germany, Sweden Socialism

22. Review  What are the 3 economic questions?  What are the 3 types of economies?  How is each system characterized?  What are the 3 economic-political systems (mixed economies)?

23. You will be assigned to a group. Each group will be given a country. Examine the societal impacts of your country’s economic-political system. What are the long-range prospects of your country’s system? Poster Project!