WHAT ECONOMISTS DO2-1

Journal (8-31 Warm-Up)

Write about your goals. What do you hope to accomplish in high

school? What do you hope to accomplish beyond

high school? Where do you see yourself in 10 years?

BIG IDEAS

1)What are the 3 questions that all economic systems answer?

2) What are the major types of economic systems?

Different Economic Systems

Economic systems ways in which countries use their resources to satisfy needs and wants

Countries must make decisions on how to distribute limited resources just like people (opportunity cost, scarcity)

3 questions are considered…

3 Basic Questions

1) What to produce?

2) How to produce?

3) For whom to produce?

What is a Model

An economic model is a way of grouping or organizing different theories on how the economy should be run.

4 Economic Models

1) Traditional Economy Based on societies values You do what you saw people doing when you

grew up Farming or fishing Developing countries

4 Models Cont’d.

2) Command Economy Rulers or people in authority decide which

products will be produced Factors of production are owned by PEOPLE OF

AUTHORITY (government) Use the internet to research the feudal

system and be prepared to answer how it is an example of a command economy

4 Models Cont’d.

3) Market Economy Government has NO say in what, how and for

whom goods are produced Factors of production are owned by INDIVIDUALS Goods traded on a market – place where goods

and services are traded Adam Smith

Scottish economist and philosopher Self interest unregulated markets will be

shaped by people’s self interests Since it’s the will of the people and NOT the

government, peoples SELF INTERESTS are fulfilled

Example of Benefit of Market Economy

You’re newspaper carrier. Why did you accept this job? A) You believe that everyone deserves a

newspaper B) It is a good newspaper and more people

should read it C) You get paid to deliver newspapers

Example Cont’d.

Most said “C” Good for you and people get to read the

newspaper What would be different if the

government regulated how many newspapers could be sold?

Market economy gives incentives something that encourages you to behave a certain wayh

4 Models Cont’d.

4) Mixed Economies combines traditional, market and command economic models

3 Types of Mixed Economies 1) Communism government owns or

controls nearly all factors of production/very little decision making for individuals Closest to command economy

3 Types of Mixed Economy Cont’d.2

2) Capitalism Individuals own the factors of production Limited government intervention

Closest to market economy

3) Democratic Socialism Government owns some factors of production

– usually utilities In between capitalism and communism

Economic System

What to Produce

How to Produce

For Whom to Produce

Example

TRADITIONAL

COMMAND

MARKET