1. You in the Economy Unit 2

2. How does the economy work? What makes it run? You make the economy run. You and your spending decisions are the economy.

3. “You know, you can’t have everything you want. There are limits to what your mom and I can afford.”

4. Economic Systems Individuals, and families, business, and governments are all limited in what they can afford. Hard choices have to be made by everyone. The principles used to make these choices are called an economic system.

5. Kinds of Economic Systems There are 3 major economic systems: 1. Traditional 2. Command 3. Market

6. Key Economic Questions 1. What do we produce? 2. How do we produce it? 3. For whom do we produce it? Each economic system answers these questions differently.

7. Traditional Systems Underdeveloped countries Lack of education People learn from family not school or teachers Generation to generation…

8. Traditional Systems No alternatives (the same thing over and over) They do not know how to do anything else.

9. Command Systems Economic decision is centralized in the government Planning authority (it decides for everyone)

10. Command Systems The influence of consumers is limited It is affected by a type of government Democratic Non-democratic…

11. Command Systems In communist countries, the government controls all aspects of people’s lives Where they work Where they live What goods and services they can buy Education

12. Command Systems Advantages and disadvantages: Fair to the people Income differences and unemployment minimized Government can be wrong (goods and services) People’s desire to work

13. Market Systems Decisions are made by individuals not the government Based on consumers’ wants and needs Consumers go to the place where buyers and sellers meet to do business in the market

14. Market Systems This market is disorganized, uncontrolled, and risky It produces waste, instability, and inequality Good idea makers (heroes) are called entrepreneurs Entrepreneurs work hard and are inventive (create things)

15. Mixed Economies The 3 major systems do not exist anymore in its pure form Nations have grown more complex, so their economy system Today every economy is mixed

16. How Free Enterprise Works The United States is a mixed economy The market system goes by the name of free enterprise Free enterprise system is one in which people are free to attempt whatever economic activity they choose

19. Free Enterprise To understand FE, you need to have in mind the following things: 1. Free choice 2. Profit 3. Private property 4. Competition

20. Decision Making by Consumers In free enterprise, the consumer rules! The consumer decides what will be produced Consumers also affect product quality and price

21. Decision Making by Consumers The concept of the consumer as the one who is in control of the market is an important one in free enterprise. It is called consumer sovereignty. Sovereignty = supreme power

22. Decision Making by Consumers Today’s consumers… are selective (not enough money) look for greatest quantity and quality choose the things they need over the things they want

23. ESL Entrepreneurs Task: Creating a new product Process: Write a proposal of your item Description Design (draw it and label Make an advertisement Present it in class

24. How Entrepreneurial are YOU? http://www.econedlink.org/l essons/docs_lessons/264_ent repreneur1.pdf