1. Name______________________ Chapter 8.2- Continued Note Taking Guide

2. Chapter 8 Economic Wants CHAPTER 8.2 ECONOMIC SYSTEMS

3. Economic Systems  No country has enough resources to satisfy all the wants of all people  Resources are scarce, difficult decisions have to be made about how to use these limited resources

4. Economic Systems  Countries need to decide to produce more capital goods and fewer consumer goods or more consumer goods and fewer capital  Economic system is an organized way for a country to decide how to use its productive resources

5. Economic Systems  Economic systems – to decide what, how, and for whom goods and services will be produced

6. Types of Economic Systems 1. Market economy 2. Command economy 3. Mixed economy

7. Types of Economic Systems 1. Market economy – individual buying, decisions in the marketplace together determine what, how, and for whom goods and services will be produced  Citizens own most of the factors of production  The free-enterprise system in the US is the best example of a market economy

8. Types of Economic Systems 2. Command economy – central planning authority, under the control of the country's government, owns most of the factors of production and determines what, how, and for whom good and services will be produced  often dictatorships  Cuba, Iran, North Korea, and Vietnam

9. Types of Economic Systems 3. Mixed economy – uses aspects of a market and a command economy to make decisions  No country has a pure market or command economy  In the US and Canada the government plays a smaller role in the economy than in command oriented economies of Cuba and North Korea

10. Types of Economic Systems  The countries of the former Soviet Union, which was once predominantly a command economy, now allow some privately owned bus to operate freely  Today most countries are moving more toward market economies

11. Types of Economic Systems  Privatization – the transfer of authority to provide a good or service from government to individuals or privately owned businesses

12. Types of Political-Economy Systems  Each country has a political system and an economic system. The political system nearly always determines the economic system.  The importance of the individual citizen has always been emphasized in the US. Therefore, the US developed a political-economy system that permits a great deal of individual freedom.

13. Types of Political-Economy Systems 1. Capitalism 2. Socialism 3. Communism

14. Types of Political-Economy Systems 1. Capitalism – or free-enterprise system – operates in a democracy  Private citizens are free to go into business for themselves, to produce whatever they choose, and to distribute what they have produced  They can also own property

15. Types of Political-Economy Systems  US – especially in the 19 th century  Now, the government has assumed a important economic role (large businesses exploit small bs, pollution, etc.)

16. Types of Political-Economy Systems 2. Socialism – the government controls the use of the country’s factors of production  Socialists do not agree on how much of productive resources government should own  How scarce resources are used o satisfy the many wants of people is decided by the government

17. Types of Political-Economy Systems  Is generally disliked by the US because it limits the right of the individual to own property for productive purposes  Associated with a mixed economy

18. Types of Political-Economy Systems 3. Communism – extreme socialism, in which all or almost all of a nation’s factors of production are owned by the government  Practiced by communist countries

19. Types of Political-Economy Systems  Consumer goods are often in short supply in communist countries such as Cuba and North Korea because the government channels a large proportion of the factors of production toward capital formation