1. Economic Systems Conclusion
Obj: Understand strengths and weaknesses of economic systems
ES: C-4 Explicitly assess information and draw conclusions
Agenda:
Economic System Spectrum
Marginal Analysis Demonstration

2. Command vs. Market
Remember, an economy is simply the mechanisms by which a central body enforces decisions about the allocation of their factor of production (WHO? WHAT? HOW?)
Command-publically owned industry and a central authority is making decisions about production and consumption
Market—production/consumption are a result of decentralized decisions from firms and individuals
***Who is answering the 3 key questions…

3. Failures: Command Public taste’s are difficult to predetermine
Soviet Union routinely made incorrect predictions about what the people would want/need, thus,
Their allocation of crucial raw materials was wasteful…shortages and inflations ran rampant
Lack incentives!!! (rewards or punishments for certain choices)
Imagine if you were a manager of a restaurant…
No property rights---these drive people to produce things of value and put resources to their best possible use

4. Failures: Market Based on infinite growth, production, consumption
All private individuals NEED to uphold morality and make responsible decisions (pollution and waste)
Requires NO oversight from any government agency
Markets can fail! When they do, how do they recover without complete devastation first?

5. The Economic System Spectrum
Command 10
Market
These markets are imperfect, completely theoretical, and could never exist in the real world
The strongest economic systems simply have the best mechanisms in place to achieve the goals society deems most essential

6. The Economic System Spectrum
Command 10
Market
United States???

7. The Economic System Spectrum
Command 10
Market
China???

8. The Economic System Spectrum
Command 10
Market
France???

9. The Economic System Spectrum
Command 10
Market
North Korea???

10. Economic Freedom Index

14. In Summation
People within these central bodies are the decisions makers!!!
No “correct” system…based on meeting societies needs in ways that they value
PEOPLE’S RESPONSES TO DECISIONS ROOTED IN SCARCE FACTORS OF PRODUCTION.