Economic Systems and the American System Section 1 All economic systems face the same basic questions. But first What is an economic system? The way in which a nation uses its resources to satisfy its peoples needs and wants What should be produced? How should it be produced? For whom should it be produced? 1. The choice/alternative you give up when you make a decision is called ________________. 2. The way in which a nation uses its resources to satisfy its peoples needs and wants is ___________. Basic economic questions: 3. _________ should be produced? 4. __________ should it be produced? 5. _____________ should it be produced? Combines the characteristics of more than one type of economy Individuals own the factors of production and make econ. decisions through free interactions Government controls the factors of production & makes decisions about their use System in which economic decisions are based on customs and beliefs that have been handed down from generation to generation Traditional economy Command economy Mixed economy Market economy You know what is expected of you Strong family and community ties Advantage Change in economy is discouraged and sometimes punished Rarely have an increase in material well-being Disadvantage Inuit of N. America Mbuti of the Democratic Republic of Congo Aborigines of Australia Examples The way its always been done Career is what your parents did (ie. Fisherman) Individuals paid according to what central planners decide. Might not be able to choose own career. Lack of incentive to work hard Lack of consumer choices Disadvantages North Korea Parts of the Peoples Republic of China Examples Marketmore than just a place its a voluntary exchange of goods and services between buyers and sellers Individual choices (careers, how to spend money, own property, option to take risks and earn profits) Competition provides choices and better products Choices, choices, choices Advantages Old, young, and sick that cant work who provides for them? Disadvantages Most countries have a mixed economy including the United States Your own money situations Individual Level: Make laws protecting private property & regulating parts of business Environmental protections, Safety guidelines, and consumer protection Local, State & Federal Government Bell ringer - photos Go over Wednesdays worksheet Circular Flow Model/notes Businesses Sell goods and services to individuals Individuals pay for goods and services they buy from business Businesses pay for resources they buy from individuals Individuals sell resources to businesses Businesses Pay Taxes Individuals Pay Taxes Govt benefits to businesses Govt benefits to individuals Charts in Motion Charts in Motion US Economy Limited Role of Government Freedom of Enterprise Freedom of Choice Profit Incentive Competition Private Property Governmental Role has increased since 1880s in the U.S. Often called Laissez Faire when pure capitalism exists which means let them do as they choose in French Includes regulations, laws and taxation You are allowed to own your own business You are able to earn a profit or lose everything You must still follow government guidelines and regulations Name 5 businesses in Lincoln that are privately owned. Freedom of Choice Buyers make the decisions about what should be produced Government has little say in what is produced Think of something you have purchased that you did not like. Did you ever purchase that item again? Have you ever wanted to purchase something but could no longer find the product? Profit Incentive Profit is what is left when all of the businesses costs have been paid If profits are not realized the business will fail Can you think of two or three similar products sold by different companies that have the same or similar prices? Competition Profits encourage others to be competitive Competition leads to efficient use of resources Name a product that has a lot of competition. Name a product that has little or no competition. Private Property Allows individuals to own property Protected by the Constitution Make a list of 5 items that you own. Which of these items could be used to generate wealth? Bell Ringer Circular Flow worksheet 3 questions Hand in grey Bell Ringer Sheet Review for test TOMORROW Staple all chapter 1 & 2 stuff together take home and study!!!! Vocabulary Factors of Production product break down Circular Flow Model Opportunity Cost Goods vs. Services Needs vs. Wants Economic Systems Characteristics of US Economy REVIEW YOUR NOTES!!!!