1. 7 th Grade Social Studies Instructor Mr. Babcock

2.  Part Two Objectives  Part Two Vocabulary  Part Two Concepts Types of Economic Systems Characteristics of the American Economy Goals of the American Economy

3.  Are you able to identify and describe what three questions must all economic systems answer?  Are you able to identify and describe the major types of economic systems and how they differ?  Are you able to explain the role of government in our free enterprise system?  Are you able to explain how freedom of choice and freedom of enterprise apply to the American economy?  Are you able to identify and describe the roles played by private property, profit incentive, and competition in the American economy?  Are you able to identify and explain the goals of the American economy?  Are you able to explain how people balance economic rights with economic responsibilities?

4.  Economic System  Traditional Economy  Command Economy  Market Economy  Mixed Economy  Capitalism  Laissez-Faire  Free Enterprise  Profit  Profit Incentive  Private Property  Competition  Economic Efficiency  Economic Equity  Standard of Living  Economic Growth

5.  No matter what type of economic system a country uses, they must answer each of the three basic questions… What should be produced? How much should be produced? For whom should it be produced?

6.  There are four basic types of economic systems: Traditional System  All three questions are answered based on tradition  Typically, skills and trades are passed down through families from one generation to the next  Often, religion is very influential in setting and maintaining traditional ways  Very few examples of this type of system remain in modern societies. Typically, traditional economic systems are found in less developed parts of the world

7.  There are four basic types of economic systems: Command System  Similar to traditional in that individuals have little say in determining their role in the economy  In a command system, the central planning authority (the government) makes all of the decisions about how to use their country’s factors of production  Communism and Socialism are both command economic systems

8.  There are four basic types of economic systems: Market System  Individuals, not government or tradition, determine how to use the factors of production to best take care of themselves and their families  A very limited government might set basic parameters for this system, but in large part, the individuals determine what will be made, how it will be made, for whom it will be made, and at what price (set through supply and demand  There are no actual pure market systems operated by any country in the world at this time

9.  There are four basic types of economic systems: Mixed System  This system combines some elements of a market system and some elements of a command system  Today, this is the most common type of economic system on Earth because it balances the benefits of free market competition with the protections, organization, and safety net of a command system  Examples include the US, England, France, Canada, Germany and many othersM

10.  There are 6 basic characteristics of the American Economy- Limited Role of Government – the government does little to interfere with answering the three basic questions and instead allows individuals to make those choices based on supply and demand Freedom of Enterprise – any American can take a risk, start a business and make the decisions about the factors of production, and either earn a profit or fail Freedom of Choice – the reality is that buyers, not sellers, determine what should be produced and what its value is in society… consumers do this by choosing to purchase or not purchase various goods and services at various prices

11.  There are 6 basic characteristics of the American Economy- Profit Incentive – Entrepreneurial risk exists because there is a chance to make a profit. It is this possibility that encourages entrepreneurship in the first place Private Property – All businesses are privately owned rather than owned by local, state, or national government Competition – This is the rivalry among producers and sellers of similar products, based on profit incentive, that drives producers and sellers to seek to win more business (market share) by offering lower prices and/or better quality products than other producers and sellers

12.  As a society, we are constantly working to see that our economic system meets each of the following goals: Economic Freedom – individuals, not the government or tradition, deciding whether or not to start a business, own private property, or otherwise make economic decisions in the marketplace Economic Efficiency – the economy works such that there is little to no waste of any of the factors of production Economic Equity – everyone plays by the same rules as they participate in the economy Economic Security – even if you take a risk and fail, there are government and community organizations and programs in place to assist you Economic Stability – the system works so that the standard of living (material well-being of the people of a society) continues to improve over time Economic Growth – the economy continues to grow at the same rate or faster than the population of the country is growing