1. ECONOMIC SYSTEMS

2. Types of Systems Traditional Economies- the allocation of scarce resources comes from ritual, habit, or custom Command Economies- a central authority (government) makes almost all the What, How, and For Whom economic decisions Market Economies- people and businesses act in their own best interests to answer the What, How, and For Whom questions

3. Mixed Economies Most economies include a mix of traditional, command, and market economies The United States has a mix of command and market economies We have a market (free enterprise) economy with some government intervention

4. PlannedFree North Korea Russia India France China Germany Hong Kong Great Britain United States Cuba

5. Free Enterprise Capitalism Individuals own most of the factors of production. This economic system exists because of free enterprise In a free enterprise economy, competition is the key component with very little government interference

6. Major Features of Capitalism Economic Freedom Private Property Rights Voluntary Exchange Profit Motive Competition

7. Capitalism Economic Freedom allows individuals and businesses to make their own decisions Private Property Rights allows individuals to own and control their possessions Voluntary Exchange happens when both parties willingly trade and benefit in the transaction

8. Capitalism Profit motive is the driving force that motivates people/businesses to improve their product Competition results in goods and services being produced at the lowest possible cost with improved quality

9. Benefits of the Free Enterprise System Individual freedom of producers and consumers Responsive prices Variety of goods Creation of wealth Investment opportunities

10. The Entrepreneur The entrepreneur is one of the most important people in a free enterprise (capitalistic) economy. The entrepreneur organizes and manages land, labor, and capital in order to seek the reward called profit. In other words – Entrepreneurs make things happen

11. The Consumer Consumers play an important role in the American Free Enterprise economy They control what is produced when they express their wants through purchasing goods and services

12. The Government Provider & Consumer – Federal, State and Local governments provide goods and services for citizens. In the process of providing, government consumes factors of production Protector – The government protects property rights and enforces contracts to ensure an efficient and fair economy

13. The Government cont. Regulator – The national government is charged with preserving competition. Local and state governments control businesses with zoning regulations, taxes, insurance rates, etc.

14. Outside impacts on the economy Baby BOOM Generation Demographic changes will drastically change the ratio of retirees to workers Increased taxes to pay for government pensions, Medicare, etc. Affects the entire circular flow model