Daily Writing Prompt What are the four types of economic systems?
-
Upload
winfred-cummings -
Category
Documents
-
view
213 -
download
1
Transcript of Daily Writing Prompt What are the four types of economic systems?
Daily Writing Prompt
What are the four types of economic systems?
The Free Market• Individuals and businesses own the factors of
production• Self-interest – buyers and sellers consider
their own personal gain• Businesses engage in competition for
consumer dollars
Free Market (cont.)
• Profit is the incentive to participate in economic activity
• Profit = financial gain• Revenue = income, $ you take in• Cost = $ you spend• P=R-C
Adam Smith
• Adam Smith wrote The Wealth of Nations• “The Invisible Hand”• No government intervention• Consumers get products they want• Prices reflect costs of producing products
Advantages
• Highly Efficient• Economic Freedom• Competition
encourages innovation and growth
Disadvantages
• No economic security
• Inequality• Monopolies
Command Economy
• “Centrally-Planned”• Government controls the factors of
production and decides what gets produced• No consumer sovereignty
Communism• Karl Marx & Friedrich Engels – The
Communist Manifesto
• Workers will overthrow their oppressors & establish an equal society
• “Workers of the world, unite!”
Advantages:
• Focus on equality• More social
services• Stable
Disadvantages:
• No incentives to work hard•Inefficient – can’t adjust to consumer demands•Limited freedom
GovernmentEc
onom
y
Free Not Free
Free
Not Free
Making Choices
• Trade offs – all of the alternatives that we give up when we make a decision
• Opportunity Cost – the most desirable alternative given up as the result of a decision
Making Choices
• Guns vs. Butter: Refers to the trade off that countries make when choosing between producing domestic or military goods
Exit Ticket
• How are market and command economies different?
• What are the advantages and disadvantages of market and command economies?
Do Now
• Pg. 28 #3,5,6,7• Pg. 34 #3,5,6• Pg. 38 #3,4,5,6
Adam Smith & Obama
• Would Adam Smith have agreed or disagreed with President Obama’s handling of the economy?