1. How communities deal with scarcity???
Economic Systems
How communities deal with scarcity???

2. Experiment Time!!!!

3. The Problem of Scarcity
Society:
more than one person
Let’s Use Some Ganjeros to create a competition for the answer.
Competition

4. Competition
The process whereby conflicts of interest among the members of a society develop due to scarcity.
Inevitable in a society. It will happen!! Why?
Competition ends in winners and losers.

5. What type of competition exist in today's economy??
NON- Price Competition
ex. violence, “first-come, first served”, height, beauty, smartest, strongest, etc...
Price Competition
People who are willing and able to pay the market price will get the thing they want.
What do we need in order for prices to work?
We must have private property that can be freely exchanged.

6. Due to scarcity and competition we must decide as a society on how to answer the following:
What to produce??? (Goods and Services)
What would you like to see more production of? Less of?
Who makes these decisions?
How to produce??
What methods will be used? What technology is used?; How much will be spent on production?; How is production going to be organized?;
Who shall receive??
How will goods be distributed??
Do you think goods are distributed well in Vietnam?
These answers will lead us to understand what type of economic system we have!!!

7. This leads us to two primary economic systems:
Free Market – citizens in society as consumers and producers help answer the previous questions.
Command or Planned Economy- the government answers the previous questions.
….although we have only two economic systems, all countries in the world today are actually MIXED ECONOMIES. (meaning a little of both!!!)
Ex. Socialism

8. You might see these systems described as such:

9. The Free Market

10. WHAT IS A FREE MARKET? What does he mean?????
An Economy Based on Self Interest and Private Gain…Greed!
Belief in the PROFIT MOTIVE
The system relies on Incentives- a promise of something positive which pushes us to act a certain way to get the reward.
ADAM SMITH SAID IT BEST:
“It is not the benevolence (kindness) of the butcher, the brewer or the baker that we expect dinner, but from their regard to their own interest.”
What does he mean?????
Who is the only one who relies on benevolence??

11. Free Market also believes in some must haves:
Private Ownership/ Property Rights- Your right to own something not only land.
It only works if laws/ governments support these rights.
How are our property rights assured???
Economic Freedom- meaning no restrictions on what you can do in the economy. You can more or less consume/ produce what you want.

12. Brainstorm on this question. How is greed connected to the free market
Brainstorm on this question. How is greed connected to the free market? Is it good? Bad? Something in between?
Our Experiment Results Might Support Your Answer.

13. ADAM SMITH’s INVISIBLE HAND and the Free Market
The idea that the government should not interfere with the economy. That the laws of supply and demand guide society into a best possible situation.
What are examples of what Adam Smith thought government should not do??
How will supply and demand guide the economy?? (We will get to this later on.)

14. Do you believe in a FREE MARKET
Do you believe in a FREE MARKET?????? Does it put society in the best place possible? No government intervention at all!!! HMMM???
Capitalist- someone who believes in the free market (which is also called capitalism!!)

15. Do you believe in a FREE MARKET
Do you believe in a FREE MARKET?????? Does it put society in the best place possible?
What are the benefits and consequences of the free market?
Create a t-chart based on the ideas we have discussed in class and the ideas you and your group members come up with.
Include examples of what you are referring to.

16. The Missing Market
In the free market would we see all of these in the quantities and prices consumers want?

17. Based on what you see here are all people happy with the free market
Based on what you see here are all people happy with the free market? Explain.

18. On the other side of the spectrum is a Planned/ Command Economy (Aka Communism) In this economic system who makes all the decisions in the economy? Why.

19. What are the big differences between the free market and the command economy?
The Public Sector
What is it? The State, regional and local governments
The public sector (the gov.) decides what to produce, how to produce, and how to distribute goods and services in a command economy.
How does the government do these things?
Public Ownership!!! Laws, etc.

20. For Example Vietnam owns:
Why do they own these companies? Is Vietnam a totally planned economy?
Vietnam’s ten biggest enterprises in 2012:
- Vietnam National Oil and Gas Group (PetroVietnam)
- Vietnam National Petroleum Corporation (Petrolimex)
- Vietnam Posts and Telecommunications Group (VNPT)
- Samsung Electronics Vietnam Limited Company (PRIVATE)
- Vietnam-Russia Oil and Gas Joint Venture (Vietsovpetro)
- Military-run Telecom Group (Viettel)
- Saigon Jewellery Limited Company (SJC)
- The Electricity of Vietnam Group (EVN)
- Vietnam National Coal-Mineral Industries Group (Vinacomin)
- Vietnam Bank for Agriculture and Rural Development (Agribank)

21. What is the goal of the command economy/ public sector?
To even out inequality based on income and wealth.
To offer goods that would not be offered by private firms or restrict goods deemed harmful to people.
Why does the government have to do these things??
Over-provision- Examples?
Under-provision/ Missing Market- Examples?
How do governments control these issues??

22. What are they referring to?

23. Milton Friedman
Spending on oneself is most efficient, as one is inclined to search for the goods yielding the highest utility for money spent.
Spending one’s own money on others might still mean searching for good value but one runs the risk of buying something the other person doesn’t want. Spending other people’s money oneself means that inclination is low to shop around for the best deal and to be frugal in one’s purchases. Finally, spending other people’s money on others…..well, go figure.
Is Friedman for or against a free market?? Explain. Do you agree with his beliefs? Explain.

24. What are the benefits and consequences of a command economy
What are the benefits and consequences of a command economy? (Use our experiment to support if possible)
Create a t-chart based on the ideas we have discussed in class and the ideas you and your group members have gathered from your articles.
Include examples of what you are referring to.

25. Where do these countries go on the spectrum? How do you know?
France
USA
China
Sweden
Canada
Thailand
Cuba

26. Extension :
Read the article below and summarize the authors opinion. Provide evidence as to why he believes the way he does.
The Failure of the Free Market- by Mathew Stein