1. For ALL Economies Each address the three key economic questions
What goods and services should be produced? (Allocation)
How should these good and services be produced? (Production)
Who consumes these goods and services? (Distribution)

3. Traditional Economy Features:
An economy that relies on habit, custom, or ritual to decide the three economic questions.
Features:
Little room for innovation or change
Revolves around the family
Work divided along gender lines
Small and close communities
Remain stagnant, resisting change (both on Individual and Community Level)
Slow to adopt new technology or radical new ideas
Low standard of living

5. Market Economy Features:
Decisions are made by individuals and are based on exchange, or trade.
Features:
Individuals answers the three economic questions
Also called:
Free Market
Capitalism

6. Command Economy Features: Allows for better mobilization of resources
Central Government in control and making all of the decisions for the economy
Features:
Allows for better mobilization of resources
However, it restricts freedom and offers no competition.
Also Called:
Centrally Planned Economy

7. Mixed Economy Market-based but the government plays a limited role
Features:
Exist because no one is self-sufficient
Markets allow us to exchange the things we have for the things we want
Establishes goods and services that markets cannot so efficiently or fairly
Balance between control and freedom

11. Stossel Economic Systems

12. Explain what this quote means
“Taxes are what we pay for civilized society” Oliver Wendell Holmes Jr., 1904
Taxes are a necessary part of life in the United States.
Although taxation has often received a less than favorable review by
taxpayers, the benefits of taxation are positive.
What do you think is meant by this quote? Do you agree with it?
(Answers will vary.)

13. Ch. 3 American Free Enterprise
How do the public & private sectors interact to maintain a stable, efficient, and growing economy?

14. You will learn…
the foundational principles of American free enterprise,
The government’s role in our mixed economy

15. What is the American Free Enterprise?
Any free market Economy relies on self-interest and individuals.
Specifically, Free Enterprise refers to a set of legal rules regarding commercial interaction.

16. Economic Goals: 3 MAIN U.S. GOALS: Economic Growth Full Employment
Price Stability

17. Secondary Goals: Economic Efficiency Economic Freedom
Equitable Income Distribution
Economic Security
Balance of Trade

18. Terms You Should Know… Public Sector:
The part of the economy that involves the transactions of the government
Private Sector:
The part of the economy that involves the transactions of individuals and businesses

19. Economic Freedom Individuals work wherever they choose
Businesses hire whomever they choose
Minimal govt. intervention

20. Government’s Role… Meet 3 primary economic goals Regulate the economy
Provide public goods
Solve market failures
Provide “safety nets”

21. What is American Free Enterprise?
Profit Motive—force to improve material well-being
Competition—rivalry to attract customers & lower costs
Private Property Rights—you own your possessions
Voluntary Exchange—you may decide what & when to buy & sell
Open Opportunity—everyone can compete
Free Contract—you decide what agreements to enter into
Legal Equality—everyone has the same legal rights
Public Disclosure Laws—companies provide full information

22. Competition: Think of one way that each fast food provider has tried to beat the competition?
Producers have an incentive to ‘beat the competition’
Consumers benefit as a result

23. Private Property
Individuals & businesses can buy & sell property & limit its use.
What is significant about this picture       
What does it tell you about private property?

24. Contracts
Individuals & Businesses form written agreements that are legally binding.
You decide what agreements to enter into based on your needs & wants/ perceived benefits

25. Self-Interest Consumers & businesses operate to their own benefit.
Their decisions don’t have to please the govt, other consumers, or other producers.

26. Voluntary Exchange
Both consumers & producers gain from voluntary exchange of goods/services.

27. Profit Motive
Profit is a powerful incentive that leads entrepreneurs to accept the risk of failure.

28. Solving Market Failures
Definition: when the “free market” does not provide a g/s that consumers need at a price they can afford. Essentially, when the market does not distribute resources efficiently.
Highways
Rural electrification
Others?

29. Providing Public Goods
Anything that is shared by us all
Why? Because we won’t or can’t pay for it individually and it would be difficult or impossible to exclude nonpayers.
Brainstorm examples…
Comes down to cost/benefit analysis

30. Public Goods Example

32. The "free-rider" problem
Why don’t towns charge admission for 4th of July fireworks displays?

33. Key Terms
Public goods eliminate “free-riders,” or people who do not pay for a g/s, but would receive benefits anyway
Fireworks common example b/c are both non-rival & non-excludable. Makes it easy for individuals to free ride, utilizing public good without contributing to its production.
Non-Rival good –consumption by one consumer doesn’t prevent simultaneous
consumption by other consumers
Non-excludable -can’t prevent others from obtaining it

34. MR. CLIFFORD EXPLAINS:

35. Broken Windows Theory
"One unrepaired broken window is a signal that no one cares, and so breaking more windows costs nothing."

36. Broken Window Theory
Broken windows policing assumes that serious crime can be reduced by strongly enforcing minor crimes.
The "broken window" theory suggests that neighborhood order strategies such as those listed below help to deter and reduce crime.
Quick replacement of broken windows
Prompt removal of abandoned vehicles
Fast clean up of illegally dumped items, litter and spilled garbage
Quick paint out of graffiti
Finding (or building) better places for teens to gather than street corners
Fresh paint on buildings
Clean sidewalks and street gutters

37. Poverty Terms
Poverty Threshold:
income level below which income (Dollar amount) is insufficient to support a family or household.
Vary according to size of family and ages of members in household.
Updated annual for inflation using the Consumer Price Index (CPI)
Focus on the dollar amount families need to live.
The Poverty Rate
The poverty rate is the percentage of people in a particular group who live in households below the official poverty line.

38. How much $ do people make?