1. THE THREE TYPES OF ECONOMIC SYSTEMS

2. INTRODUCTION We all need goods and services:
BASIC NEEDS – the same in the developed societies of the western world as they are for tribal societies in the remote parts of the developing world → food, water, shelter, clothes, warmth.
WANTS – we do not really need, but are pleasant to have ( a car, a phone, a microwave…) → we have to set priorities → COMPETING WANTS

3. WANTS OR NEEDS?

4. THE FUNCTION OF ECONOMY
allocate resources (land, labour, machinery, capital, etc.) which are scarce amongst unlimited wants
solve basic economic problem:
WHAT SHOULD BE
PRODUCED?
HOW SHOULD IT BE
PRODUCED?
FOR WHOM SHOULD
IT BE PRODUCED?
WHO CAN MAKE THESE DECISIONS?
the government
the market system
both

5. WHO AND WHY? Who makes economic decisions? Who owns resources?
Who provides goods and services?
Why?

6. READING – THE THREE TYPES OF ECONOMIC SYSTEMS, RB p 30
I Read the text and find out the answers to
the questions from the previous slide.
II Make notes on the text with the help of
the table on p 31.

7. READING, RB p 30 – DO YOU REMEMBER THE ANSWERS?
MARKET ECONOMY
resources are a________ by
the market mechanism
(s________ and d________)
stimulates c________ →
lower costs, a wider c________
of goods and services and
a better quality for c________
the role of government is
l________: provides p_______,
national d________ and
j________ and ensures
a l________ p________
f________ (fair competition)
ADVANTAGES AND
DISADVANTAGES
competition makes the
economy more e________
better q________ products
at lower costs
some goods and services
are not p________ by private
firms only interested in
making a p________
may sacrifice p________
interest in exchange for
lower c________

8. COMMAND ECONOMY – DO YOU REMEMBER THE ANSWERS?
the government p________, o________ and c________ the production process
production of s________ goods with little v________ and choice for consumers
r________ belong to the state
goods and services are d________ to consumers by the state
ADVANTAGES AND
DISADVANTAGES
more equal distribution
of w_______ and i_______
production is for
n_______ rather than for
profit
people tend to be less
m_______ to work
efficiently
the s_______ of living is
often lower

9. GROUP THE FOLLOWING EXPRESSIONS.
government interference
privately-owned companies
market mechanism
market reliance
state-owned companies
laissez-faire
government-run business
central planning system
privately-run companies
government intervention
USSR

10. PLANNED ECONOMY vs. MARKET ECONOMY
market m_________
market r_________
p_________-owned companies
privately-r_________ companies
l_________-faire
government i__________
central p_________
s__________-owned companies
U__________

11. PLANNED ECONOMY vs. MARKET ECONOMY
government interference
central planning
state-owned companies
government intervention
USSR
market mechanism
market reliance
privately-owned companies
privately-run companies
laissez-faire

12. MIXED ECONOMY PUBLIC SECTOR VS. PRIVATE SECTOR
Who provides goods and services?
Why? (What is their interest?)
What do the two sectors consist of?

13. MIXED ECONOMY – DO YOU REMEMBER THE ANSWERS?
some resources are
allocated by the g_________
(the p_________ sector) and
the rest by the m_________
(the p_________ sector)
the state provides
a m_________ standard of
living for those unable to work
the public sector provides
p________ goods and services
(decided by the c________ or
local g________)
public goods are usually
free if paid for by t________
the private sector provides
p________ goods and
services a________ by
the market system
private firms own the
m________ of production
and make production
d_________
the government should
ensure f_________
competition in the private
sector

14. MIXED ECONOMY PRIVATE SECTOR PUBLIC SECTOR
private goods and services are sold through the market mechanism
production decisions are made by firms in response to consumers
private owners
making a profit
profitable businesses
merit goods (education, health) and public goods are decided by the government or local authorities (e.g. municipalities, counties)
Care for socially important issues of public interest (e.g. protecting environment, consumers)
Less profitable and unprofitable businesses

16. VOCABULARY – RB, p 31 & 32
Do the tasks III, IV, V & VI in the Resource Bank.

17. TYPES OF ECONOMIES – LET’S RECAP!
FREE MARKET ECONOMY
(FREE ENTERPRISE ECONOMY)
COMMAND ECONOMY
(PLANNED ECONOMY)
MIXED ECONOMY
WHO
MAKES ECONOMIC DECISIONS?
The market:
supply and demand
sellers-buyers
producers –consumers
The state
Both the market and the state
WHY?
to allow competition and make the economy more efficient
to provide better quality products at lower costs
to redistribute wealth in the country more fairly
to care for public needs
To benefit from both economic systems

18. TYPES OF ECONOMIES – LET’S RECAP!
PLANNED FREE MARKET MIXED
_____________ _____________
Planned economy is an economy in which __________________
______________________________________________________
Free market economy is an economy in which ______________
Mixed economy is an economy in which ___________________

19. HOW DO THESE CARTOONS RELATE TO DIFFERENT TYPES OF ECONOMIC SYSTEMS?

20. MARKET OR CAPITALIST ECONOMY
ADVANTAGES ☺
DISADVANTAGES ☹
______ people are able to be productive and make great profits which may result in greater innovations and efficiency because of competition
______ What happens to the goods and services which do not make instant profit (e.g. education, health care...)?
______ the price system helps to match demand and supply so shortages and surpluses are avoided
______ people spend too much money on unnecessary things → consumerism, and not enough on merit goods which have long-term benefits

21. ADVANTAGES ☺ DISADVANTAGES ☹
______ people are able to produce and consume whatever they can afford → wider choice of goods and services, lower costs and better quality for consumers
______ manufacturers could ignore the safety of the workers, environmental issues (pollution) and go only after profit
______ there is less bureaucracy because the government has no part to play
______ unequal distribution of wealth and income → some people are becoming too powerful and rich → greater social differences

22. ADVANTAGES OR DISADVANTAGES?

23. ADVANTAGES OR DISADVANTAGES?

25. PLANNED OR COMMAND ECONOMY
ADVANTAGES ☺
DISADVANTAGES ☹
______ the distribution of wealth and income is more equal → no individual can become very rich
______ demand and supply are disregarded → shortages of goods and services
______ production is for need rather than for profit
______ low quality of goods and sevices because of no competition
______ unemployment can be avoided because the state owns and controls the means of production

26. ADVANTAGES ☺ DISADVANTAGES ☹
______ standard of living is usually lower compared with countries which use other types of economic systems
______ the state can redistribute profit to provide benefit for all the people
______ government can control the working conditions to make them safe for the workers
______ no private monopolies (where one firm controls most of the output and the market share)
______ no motivation on the part of the workers

27. ADVANTAGES OR DISADVANTAGES?

28. Which of these are command economies today?
Cuba, North Korea and Laos

30. WHAT DOES THE FUTURE HOLD FOR US?