Economic Systems

Economic SystemsDefine

1. Traditional Economy

2. Command Economy

3. Free Market Economy

4. Mixed Economy

Example

Economic Systems

Learning Target:

List the 3 economic questions.

Compare and contrast the 3 economic systems.

3 economic questions What should we make?

How should we make it?

For whom should we make goods and services?

Command Economies

Answers the 3 economic questions with: What – military goods and FEW consumer goods How – GOVERNMENT owns and makes

everything For whom – ALL people

Communism, Fascism, and most ancient societies are like this Often dictators and disliked governments Today: North Korea, Cuba, China (kinda)

Command Economies Problems:

Inefficient & wasteful Slow to change and adapt No incentives for workers No freedom to purchase desired goods Low standard of living (often poor)

Benefits: Security – basics of food and housing provided Equity – everyone receives very little equally – no super rich Close communities and nations – work together more

Market Economies

Answers the 3 economic questions with: What – consumer goods How – People and businesses own and make

everything For whom – people who can pay

Free enterprise economies = market economies Businesses (enterprises) are FREE to sell what

they want to sell True market economy = FEW government rules

on what can / cannot be made

Free Market Economies

Problems: No security b/c no job = no home or food No government help to those who need it

(elderly and disabled, for example) No rules on businesses, so they become

powerful, raise prices, & produce only profitable items

Benefits: Low taxes No waste & very efficient Complete economic freedom

Mixed Economies

Answers the 3 economic questions with: What – military goods AND consumer goods How – government, people, AND businesses For whom – all people

Mixed = command + market economies Best of both worlds or problems of both worlds? Government provides for those who need help;

MOST people buy what they need on their own

Mixed Economies

Problems: Higher taxes than market economy Waste & cheating the system Rich feel punished by taxes Businesses are limited by the government

Benefits: Government helps the needy More economic security Government protection of consumers

Exit ticket:

On the back of your chart about the activity today, answer these 3 questions:

1. Why do you think command economies failed? (most have changed to a mixed economy now)

2. What do you think about taxes – is taxing set up right in our country? Who should pay more or less if you think it should be changed?

3. What do you think about government help to the needy – is the system set up correctly, or should there be more help or less help? Why?

6 Social Goals of each economic system

Learning Target:

Define each of the six social goals.

Compare and contrast social goals of market and command economies.

6 social goals

1. Economic Efficiency: producing cheaply & without waste

2. Economic equity: 2 kindsa. Everyone earns according to his/her work

Ex: lawyer earns more than security guard b/c lawyer has longer hours and harder brain job

b. Everyone earns equally according to abilityEx: lawyer and security guard paid same b/c working

according to their abilities

Continued social goals

3. Economic freedom: choice of where to work and what to buy

4. Economic growth: producing more goods and services each year & adding new jobs

Continued social goals

5. Economic security: no fear of change (job loss, health problem, or old age)

6. Economic stability: prices staying about the same or changing slowly

Matching social goals and types of economies

In a command economy: Equity in everyone

getting paid the same Security in jobs Stability in prices

NOT important in command: Efficiency Freedom Growth

In a market economy: Efficiency in production Equity in everyone

getting paid what they earn

Freedom in choices Growth in economy

NOT important in market: Security Stability