1. Chapter 6 To what Extent do Different Economic Systems Affect Quality of life?

2. Just Imagine… You are in charge of all the money coming into your home every month What factors would you have to consider in deciding how to spend that money? Everybody in you house will have different ideas on what's important and what it should be spent on  That’s economics

3. A comparison We will looking at the economic systems of Canada and its largest trading partner, the United States What values shape these systems, how they are different, and how they are the same

4. A brief lesson in economics… Cartoon, pg 199  Why didn’t the manufacturer make more games?  Why did the truckers go on strike?  Why did the store decide to sell the game for less?  Why would anyone buy it for $99.99?

5. What Values shape the mixed and market economies of Canada and the United States? The demand for super cyborg city was so great it created a scarcity of the productscarcity  Too many people wanted the product, and not enough copies were available Some things people need are unlimited- ex air Most things that people need or want are limited. This is because resources are limited In economics resources include, money (capital), labour, and materials (resources)

7. What Creates Scarcity? Land  Materials found in the natural environment needed to produce goods and services, such as renewable and non-renewable resources  What impacts might this decision about using the land have on the land?

8. Labour  Labour consists of the physical and mental effort needed to produce goods and services  Construction workers building a house- if there aren’t enough workers, fewer houses get built How do choices concerning jobs effect the work force?

9. Capital  Consists of money that people own or borrow, used to purchase equipment, tools, and other resources needed to produce goods and services  Ex- setting up a plane production plant requires money What if the capital that built this airplane were invested in something else? How might this impact airports and air services?

10. Economic Systems An economic system is a way to solve the basic problem of scarcity Economic systems can be placed on a spectrum; their spot on that spectrum depends on the underlying values of that society

12. Spectrum of Economic Systems More government controlLess government control

13. Planned (Command or Communist) Economy At this end of the spectrum, the government makes all the decisions about how to solve scarcity The Government owns and manages all the resources needed to produce things  Resources are publicly owned  Government makes all decisions about resources  Individual consumers have little influence on decision making  Ex. Former USSR

14. Market (Capitalist or Free Enterprise) Economy On this end of the spectrum, the choices of individuals solve scarcity Private businesses manage and sell their own resources Businesses succeed if they sell products consumers want, otherwise they fail The government does not get involved Ex. The United States

15. Mixed Economy Combines private ownership and government control Individuals and government make decisions about what to produce The level of government involvement depends on what political party is in power  Liberal Party-More involvement  Conservative Party-Less involvement Ex- Canada, Sweden

16. How did they end up this way? The Canadian and American economic systems are very similar, but they developed from different starting points  Their starting points involved different answers to the fundamental question “what’s the best way to achieve the public good?”

17. The Public Good and Cooperation  The belief that individuals must consider each other and set aside their individual differences to achieve what’s best for society  What style of economic system do you think this idea fits? The Public Good and individualism  the belief that what's best for each person individually adds up to what best for society  What style of economic system do you think this idea fits?

18. History of the Different Systems Canadian Economy pg 206-207 How might the history of Canada shape the value and attitudes in Canada? The U.S. Economy pg 208 How might the history of the U.S. shape the values and attitudes in the U.S.?

19. Supply and Demand Supply and demand control the market system through a cause-and- effect relationship related to price. Supply and demand effect quality of life because they affect the prices of products we buy, the availability of products, and jobs connected to creating products.

20. Demand Demand is the quantity of a good that consumers will buy. The demand for the good is related to the price of that good Generally, the higher the price of a good, the less people will want to buy and therefore, the lower the demand. When something is expensive, people will purchase less of it or a substitute The opposite is also true: the lower the price of a good, the more people will want to buy and the higher the demand will be. When something is cheap, people will want to buy more of it

21. Supply Supply is the quantity of a good that producers are willing to make and offer for sale in the market. The supply of a good is related to the price of that good Generally, the higher the price of the good, the more producers will want to make and the greater the supply The opposite is also true: the lower the price of a good, the less producers will want to make and the lower the supply will be

22. Competition Competition is about striving to get consumers to buy their products Producers attract consumers in a variety of ways-price, product quality, and advertising Many factors can affect competition, including the value of consumers and decisions by the government to get involved in decisions about supply and demand  Ex: Coke vs. Pepsi, Ford vs. GMC, Nike, vs. Adidas  2 Donut shops case study- pg 212

23. Prices Prices in a free market system are determined by the interaction of supply and demand.

24. The price of a good will naturally move to a level where the quantity demanded is EQUAL to the quantity supplied. At this point, the market is said to be at EQUILIBRIUM. In a free market system, the equilibrium price and quantity of most goods are constantly changing as the market adjusts automatically to changes in the level of supply and demand.

25. Prices Firms are encouraged to increase production of those goods that are in high demand and to reduce production of less popular goods Goods are made available to consumers at the lowest possible price  Ford Motor company grew because of their ability to supply cars to the consumers for a lower price due to the invention of the assembly lineassembly line

27. Why do Governments get Involved in the Market Economy? Market economies rely on the decisions of individuals consumers and producers Sometimes the government may get involved to inform, protect or ensure good and fair practices  Ex. The B.C. government started its own auto insurance program because it believed private insurance companies were to expensive Can you think of any other reasons why the government may get involved?

28. The Business Cycle The free market economy does not grow at a constant rate. Instead, it goes through a continuing series of “boom” and “bust” periods called the business cycle. Boom (Peak) Periods -period of prosperity and economic growth -high level of employment -wages and profits rise, therefore spending increases -GDP (gross domestic product) is high -Problem: INFLATION Bust Periods -Economic decline and crisis -production decreases, therefore unemployment rises and wages fall -consumers restrict spending, therefore prices and profits drop -RECESSION – mild and short lived downturn -DEPRESSION – longer and severe period of decline

29. The Business Cycle

30. Government Intervention Governments may intervene in the economy by changing their level of spending and the supply of money to try to even out the boom and bust cycles (Keynesian Economics)

31. Entrepreneurs and Labour Unions Entrepreneur – a person who ORGANIZES a business and takes the RISKS associated with competing in a market economy They are the heart of the market system Labour Union – an organization of workers that ACTS to PROTECT workers’ rights and interests  Unions can pressure employers about wages, work hours, and workplace safety