1. or… Capitalists do it with an invisible hand… Chapter 2, Section 1

2. Introduction (cont.) One of the reasons for this variance is that each of these persons lives in a community or nation with a different economic system, or way of determining how to use resources to satisfy people’s wants and needs. In this section, you’ll learn about the different kinds of economic systems in the world.

3. The Three Basic Economic Questions  What to produce?  How to produce?  Who to produce for?

4.  Nations must balance available resources with desired products/services  Will more butter be produced or more guns?  Will we push for medical improvements or try to prevent deaths from natural disasters?  Do we need to stop making VCRs?

5.  How goods and services will be made.  What methods will we use?  Will more workers be hired?  Will capital goods be used instead of hiring more workers? ▪ Self-checkout or more cashiers?

6.  After goods and services are produced, how will the goods and services be distributed among a society’s members?  Prices  Government bureaucrats  Majority rule  Tradition, or religion  First-come, first-serve

7.  What to produce?  How to produce?  Who to produce for?

8.  How a society answers these three questions is what determines the type of economic system that country has ▪ Often times, WHO answers these questions in a society can tell you a lot about that nation’s economy AND political system…  We can also look at the GOAL(s) of the society to find out their economic system  Who owns the “Means of production”?  Non-human capital, technology and resources

9.  GOAL: Survival  3 questions answered by/means of production owned by: Tribe, family, tradition, beliefs  Handed down for generations  Everyone has a role  Not as productive due to lack of technological advancement and surplus goods  A tribe in the jungle of the Amazon would be an example of this system

10.  Officials consider the needs of the country and allocate resources accordingly  Wants of consumers are rarely considered  North Korea and Cuba are examples; Soviet Union used to be GOAL: Equal and Fair Distribution to all 3 questions answered by/means of production owned by : Government

11.  GOAL: Efficiency, Free choice, profit  3 questions answered by/means of production owned by individuals  Consumers spend money as they wish, sell their labor  Producers decide what goods and services they will offer Seeking your own interests benefits others “Invisible hand” – consumer demand drives production, creates profits (and losses), improves products, benefits consumers and producers