1. Basics of Economics
SS6E5 The student will analyze different economic systems.
Compare how traditional, command, and market economies answer the economic questions of 1 – what to produce, 2 – how to produce, and 3- for whom to produce.
b. Explain how most countries have a mixed economy located on a continuum between pure and market and pure command.
SS6E7 The student will describe the factors that cause economic growth and examine their presence or absence in Europe.
Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP).
b. Explain the relationship between investment in capital goods (factories, machinery, and technology) and gross domestic product (GDP).
c. Describe the role of natural resources in a country’s economy.
d. Describe the role of entrepreneurship.

2. Needs and Wants Need: something we can’t live without.
Food, water, air, shelter
Want: something we would like to have (but you can live without)
iTunes downloads, iPods, iPhones, other technology, junk food

3. Wants and Needs are Produced from Limited Resources
Limited: only a certain amount
Resources: things used to provide what we need or want
Factors of Production:
Natural resources:
Land, soil, plants, , water, oil, and minerals.
Human resources:
The work people do with their hands and their minds
Carpenters, singers, teachers, etc.
Capital resources:
The goods used to make other goods
Buildings, machines, technology that creates more technology)

4. Goods VS. Services
Services are the jobs people provide to make goods available
Pizza Delivery Person
Hair Dresser
Dentist
Teacher
Taxi Driver
Goods things that people make or grow

6. 3 Basic Economic Questions
Every nation must answer three questions about goods and services:
What to produce?
How to produce?
For whom to produce?

7. Types of Economic Systems
How a country answers the 3 economic questions determines the form of economic system.
The 4 major economic systems are:
Traditional
Command
Market
Mixed

8. Traditional Economy
Makes decisions based on what has been done in the past
People produce the goods and services they have always produced
Ex: Herd cattle, produce clay pots, fish

9. Command Economy Government controls the land, labor, and capital
Examples: Cuba, czarist Russia, North Korea, former East Germany, etc.
All of these countries: communist!

10. Market Economy People (buyers and sellers) make the decisions
Other names for a market economy:
Free Enterprise
Capitalism
Laissez-faire

11. Pure Market?
Pure Command?
Since there are no countries that are purely command or purely market, what does that make them?

12. Mixed Economy ECONOMIC CONTINUUM
Most countries have some characteristics of both systems
Continuum
ECONOMIC CONTINUUM
MARKET
COMMAND

13. The Economic Continuum
Command
Market UK
Russia
Germany US
Australia
Cuba

14. Trade in Europe
SS6E6 The student will analyze the benefits of and barriers to voluntary trade in Europe. a. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos. b. Explain why international trade requires a system for exchanging currencies between nations.

15. Trade Barriers
Countries sometimes set up trade barriers to restrict trade because they want to sell their own goods to their own people.

16. Trade Barrier: Tariffs
Tariffs: taxes placed on imported goods
Tariffs cause the consumer to pay a higher price for an imported item, increasing the demand for a lower- priced item produced domestically.

17. Trade Barrier: Quotas
Quotas: restrictions on the amount of goods that can be imported
Quotas can cause shortages that cause prices to rise.

18. Trade Barrier: Embargoes
Embargo: forbids/stops trade with another country

19. Let’s Review
What are the three basic questions that every economic system must answer?
What are the three economic systems?
The former Soviet Union was an example of what kind of economic system?
Which economic system allows for the most individual freedom?
In which economic system does the government have the most control?
In which economic system do individuals do things based on customs & beliefs?
What is the economic system of most communist countries?
How do traditional economies exchange goods?
Which country is closest to a true Market economy?
Most democratic countries have which type of economic system?