1. Georgia Performance Standard and Essential Question
SS7E5 The student will analyze different economic systems. a. 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 market and pure command. EQ: 1. How do the traditional, command, and market economies of Southwest Asia countries answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce? 2. Where are the economic systems of Southwest Asia located on a continuum between pure market and pure command?

2. Gross Domestic Product
One way to measure the standard of living is the Gross Domestic Product, or GDP
GDP is the valuse of all goods and services produced withing a country in a given year and converted into US dollars for comparison
When divided into a value per capita (or per person), it can be used as a measure of the living conditions in a country
The higher the GDP value, the better the living conditions in the country

3. What factors to you think can affect GDP?
Literacy rate
Ability to read and write
Lack of education prevents many young people from becoming engineers, doctors, scientists or entrepreneurs that the modern economies need in order to bring improvements to their countries
In many parts of the world, education is only available to those who can afford to pay for it themselves
Countries that have stronger economies usually make more money available so education is available to more people

4. Natural Resources
Distribution of natural resources throughout Asia plays a major part in determining the type of work people do and how comfortable they are able to live
A natural resource is something that is found in the environment that people need
Water, trees, rich soil, minerals, and oil are all examples of natural resources
One of the most valuable resources in this part of the world is rich farmland

5. Economic Systems
The way in which a nation uses its resources to satisfy people’s needs and wants.
Resources include:
Natural resources
Work force

6. Economic Systems
When deciding how to use it’s limited resources, every country answers 3 questions about production and distribution
What will be produced?
How will it be produced?
For whom will it be produced?
How a country answers these questions depends on the type of economic system they have.

7. Four types of Economic Systems
Traditional Economy
Command Economy
Market Economy
Mixed Economy

8. Traditional Economy Overview
Based on social roles, customs, traditions and culture determine how goods are made, sold, and bought.
Economy is based on farming and hunting.
People will make what they always make; they will do the same work their parents did. (Customs passed rom one generation to the next.)

9. Traditional Economy
What to produce?
What people need to survive.
How to produce it?
Hunting, farming, gathering (social roles determine who does what)
For whom to produce?
Make their own products (what they have always made)

10. Characteristics of Traditional
Found in rural, non-developed countries (some parts of Asia, South America, and Africa)
Customs govern the economic decisions
Technology not used

11. Characteristics of Traditional
Farming, hunting, and gathering are done the same way as the generation before
Activities are centered toward the family or ethnic unit
Men and women have different economic roles and tasks

12. Command Economy Overview
Government decides what goods will be produced, how they will be produced, and how they will be distributed.
The government would decide who would be farmers, what they would grow, and how much would be turned over to the government.

13. Command Economic System
Also called Socialism, communism
Examples: North Korea, former Soviet Union, Cuba
A lot of Government restrictions

14. Command Economy
What to produce?
Whatever the government decides
How to produce it?
However the government decides
For whom to produce?
Class reward system; waiting in line/rations

15. Characteristics of Command
Government or other central authority makes decisions about and determines how natural, capital, and human resources will be used.
Change can occur easily, because its government driven
Little individual freedom
No competition between businesses

16. Characteristics of Command
Business are not run to create a profit
Consumers have few choices in the market
Factories are concerned about meeting quotas (not profit)

17. Characteristics of Command
Shortages often occur because of poorly run factories and farms
Government determines your job
Government sets the price of goods and services

18. Market Economy Overview
Based on Individual choices and voluntary trade
Systems in which most of the basic economic questions are answered by producers and consumers acting freely.
Production and economic decisions are based on supply and demand.
There are no pure market economies in the world today!!!

19. Market Economy Overview
Individuals own and operate the buildings, machinery, property of production.
Production and distribution questions are answered by prices and profits.
Businesses will make products, and provide services that will earn a profit.
Standard of living is higher in this system.
Prices of goods depend on how much is available and how many people want it.
Examples: US, Great Britain, Japan

20. Market Economy
What to produce?
What people want to buy and sell
How to produce it?
Supply and demand
For whom to produce?
Determined by how much someone is willing to pay for it

21. FIVE CHARACTERISTICS OF MOST MARKET ECONOMIES TODAY
1. PRIVATE OWNERSHIP OF PROPERTY
2. INDIVIDUAL INITIATIVE OR ENTREPRENEURSHIP
3. COMPETITION
4. FREEDOM OF CHOICE
5. PROFIT MOTIVE

22. Market Economy Characteristics
Competition determines prices which increase the quality of the product (you want to make the best and most inexpensive product, so consumers will buy your product instead of your competitor’s product)
No government intervention in the economy
ALSO CALLED CAPITALIST ECONOMY

23. Mixed Economic System
Features a mixture of traditional, command, and market systems
Most all economies today are mixed
The government enacts some regulations, but its role in the economy is limited.

24. Mixed Economy
Individuals own most resources and determine what and how to produce.
Government regulates certain industries.
Has features of both market and command economies.
Example: China, most nations
The US has a market economy but the government still has control over wages, social security and some policies.

25. Most Countries…..
Most countries have a mixed economy where they sway back and forth between a pure market and pure command economy.
A pure market is an economy in which pure competition prevails. – NO GOVERNMENT INTERVENTION
A pure command is an economy in which the government makes all decisions. – NO FREEDOM = COMPLETE GOVERNMENT CONTROL

26. ____________________________________________ _
ECONOMIC SYSTEMS
Who Answers the
Questions in the
Economic Systems
____________________________________________ _
Traditional Command Market
Tradition, the the
Religion, government consumers
Customs, and and the
and the past central planners producers

27. ECONOMIC SYSTEMS CHART
What to Produce
How to Produce
For Whom to Produce
TRADITIONAL
Determined by
Custom, habit, tradition, religion, law
COMMAND
Government or central planners
MARKET
Determined by individuals

28. Economic System in Israel
Most developed economy in Southwest Asia
Has high tech industries
Lacks natural resources– depends on imports of most agriculture goods
agriculture, fishing, and mining (diamonds)
manufacturing (metal products, electronic and biomedical equipment, processed foods, chemicals, and transport equipment)
Israel has a Mixed Economy

29. Economic System in Saudi Arabia?
Oil-based economy, also hs manufacturing and financial industries.
Strong government control over major economic activities.
Government encourages private buisnesses
FYI: Possesses 25% of the world's petroleum reserves and ranks as the largest exporter of petroleum.
The King and his advisors make most of the decisions about how and where to produce oil profits. Saudi Arabia has a Mixed Economy.

30. Economic System in Turkey?
Great oil wealth, but many Iranians do not share in the money.
Key industries: textiles, oil refineries , iron steel, food industries (relies on agriculture)
Government attempts to keep tighter control.
Government regulates banks, transportation and communications.
Command economy not efficient.
Turkey has a Mixed Economy.

31. Economic System in Turkey?
Turkey has the least economic freedom of the three other countries.
Industries (airlines, railroads, telephone, and television) are controlled by the government.
Recently, the government has been allowing more private ownership and more laws have been passed to protect business owners.
Turkey has a Mixed Economy.

32. ECONOMIC FREEDOM CONTINUUM
66.1-Israel
PURE COMMAND
60.8 Turkey
PURE MARKET 10 20 30 40 50 60 70 80 90
100
Repressed
Free
52.8- Saudi Arabia

33. Economic Vocabulary

34. Trade Barrier
Any law or practice that a government uses to limit, slow down or prevent free trade between countries
Some trade barriers are political and designed to hurt another countries economy
Tariff: tax placed on goods when they are brought (imported) form one country to another.
Taxes
Embargo: An official ban on trade with another country
Quotas: a limit on the amount of a product that may be imported during a given period of time.

35. Capital Human Capital Capital Goods
The knowledge and skills that allow workers to produce goods and services and earn an income
Capital Goods
Resources such as factories, machinery, and tools that people use to make other goods

36. Entrepreneurship
The rare mixture of the qualities needed to create and run new businesses

37. Specialization
Countries specialize in producing those goods and services they can provide best and most efficiently
Specialization is a way to build a profitable economy and to earn money to buy items that cannot be made locally
Not country can produce all the goods and services it needs, meaning no country is self-sufficient

38. Financial Info Currency: the type of money used
Exchange rate: System of changing from one type of curency to another.
Most countries in Asia have their own type of currency
Due to international trade, countries must be able to exchange their currencies with those used by other countries around the world.

39. Factors of Production
The resources needed to produce goods and services
There are four factors of production
Natural resources
Labor
Capitol goods
entrepreneurs