To What Extent do Different Economic Systems Affect

Quality of Life?

Focus Questions

• What values shape the mixed and market economies of the United States and Canada?

• How do economic decisions about scarcity, supply and demand and competition affect individuals and groups?

Vocabulary

• Economics: study of production, distribution and consumption of goods and services.

• Economic System: the way a particular society organizes the production, distribution and consumption of said goods and services.

It’s All About Economics

• Simple economics is about making decisions

• What to make, grow, buy, sell, consume?

• Economics affects everyone

• It affects income, employment, taxes and government

The Economy

• Economy: all the resources and processes involved in making, distributing and consuming goods and services.

The Basic Economic Questions

•What to produce?

•How to produce it?

•Whom will it be produced for?

Means of Production

• Also known as factors of production, economic resources are anything used to produce goods or services.

• In any society, the supply of economic resources is limited.

The Factors of Production

• LAND: Includes all the materials and resources found in the environment that are necessary for the production of goods. This can include both renewable and non-renewable resources.

• Renewable: resources can be replaced over time if used carefully, for example forests.

• Nonrenewable: Resources that exist in limited quantity. Once they are gone, they can never be replaced, for example crude oil.

• LABOUR: Includes all the physical and mental work done by people to order to produce goods and services.

•Labour includes physical work, mental effort, management and entrepreneurship (risk taking)

• CAPITAL: Includes the money needed to be invested in production. Also includes all the tools, resources and machines used in production. Capital includes the factories and offices too.

HUMAN WANTS

• Includes both needs (basic necessities for life, including food, shelter and clothing) and wants (things that people desire).

• It is often difficult to distinguish wants from needs.

• Human wants are unlimited mainly because people tend to want more and more goods and services.

SCARCITY

• Scarcity is one of the foundations for economics and a problem facing all societies.

• Economies attempt to address scarcity

• Scarcity occurs when there are unlimited wants and limited resources

• The factors of production can limit the supply of what people want

• Scarcity exists because people want more than their society is able to produce with the resources available to it.

• Because of scarcity, societies are forced to make decisions about how the scarce resources will be used.

ECONOMIC SYSTEMS

• There are basically four types of economic systems

• This course deals with Market Economies and Mixed Economies

Traditional Economic Systems

• Economic decisions are based on the past practices and the wisdom of ancestors.

• Ex: Trade between Indigenous People

• Medieval traders

Centrally Planned Economic Systems

• All economical decisions are made by the government based upon its political ideology.

• Ex: The Soviet Union

People’s Republic of China

Market Economic System

• Decisions are based on the actions of individuals and buyers and sellers exchanging goods and services with each other.

• Ex: The United States of America

Mixed Economic Systems

• Decisions are based both on the actions of individuals in the market and upon government policies.

• Ex: Canada

• Most real world economies are mixed economies, but some are closer to being pure market than others, hence our examination and comparison of the economies of Canada and the United States.