Essential Question: How do economic systems answer the
questions of what, how, and for whom to produce?
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Standards: SS7E1a, SS7E5a, SS7E8a Compare how traditional,
command, and market economies answer the economic questions of (1)
what to produce, (2) how to produce, and (3) for whom to produce
SS7E1b, SS7E5b, SS7E8b Explain how most countries have a mixed
economy located on a continuum between pure market and pure
command.
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What is Economics? Before we can discuss economic systems, we
need to review the basic concepts of Economics.
Slide 4
Activator: What is Economics? Write your own definition of
economics. Things to think about while developing Things to think
about while developing your definition: your definition: 1.Products
2.Money 3.Business
Slide 5
Economics the choices we make about how to use limited
resources to produce goods & services that meet our unlimited
wants & needs.
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Hi! My name is Stan and today I am going to teach you about
economics.
Slide 7
Yesterday, when I was walking through town, I decided to go to
Bubbas Ice Cream. My friend Diana works there. Diana provides a
service to me because she serves me ice cream. A service is any
kind of work performed for others. The ice cream is a good. A good
is something you can feel, or any kind of merchandise. Bubbas Ice
Cream
Slide 8
Look at the pictures on the right. Which of these pictures show
goods and which ones show services? 1) 2) 3) 4)
Slide 9
I asked Diana for a double scoop of my favorite kind of ice
cream: mint chocolate chip. I am sorry Stan, we are all out of that
flavor, she said. Disappointed, I settled for vanilla. Im sorry
Stan!
Slide 10
What is supply and demand? The supply of mint chocolate chip
ice cream at Bubbas was gone because it was in high demand (wanted)
by many customers. Look at the chart on the left to see what
flavors are in supply at Bubbas Ice Cream.
Slide 11
What is supply and demand? Supply is the amount of something
available for use.
Slide 12
What is supply and demand? Demand is how much of a product or
service is desired by buyers.
Slide 13
Diana asked me if I would like my vanilla ice cream in a cup or
a cone. I asked for a cone. Diana said I was lucky because there
was only one more cone available. The little boy behind me in line
wailed, I wanted my ice cream in a cone! I told Diana that he could
have the last cone, and that I would have mine in a dish with
chocolate syrup.
Slide 14
There was a scarcity of cones at Bubbas. Scarcity means that
there are limited supply of something, and therefore, people must
make choices. Look at the pictures on the right. Which pictures
show a scarcity? 1) 2) 3)
Slide 15
After I finished my ice cream, I said goodbye to Diana and
left. In the street I heard two children singing a song to the tune
of You Are My Sunshine. It went like this: We are consumers! We are
consumers! We are so happy when we can shop! We are consuming goods
and services, But our wants just will not stop!
Slide 16
I found myself singing along to the tune. When we were finished
singing I asked, Where are you two going? The boy, whose name was
Andy, answered: Weve saved up all our money and today we are going
to the toy store! My sister Sara wants to buy either a rabbit or a
bike and I want to buy either a basketball net or a skateboard. Toy
Store
Slide 17
What are producers and consumers? n The two children in this
example are consumers. A consumer is anyone who buys a good or a
service. n The toy store owner in this example is a producer. A
producer is anyone who makes or grows a good or performs a service.
Consumer
Slide 18
What is opportunity cost? n Andy had $65.00 to spend at the toy
store. The basketball net cost $50.00, so he had to buy that
instead of the skateboard, which cost $75.00. n Sara had enough
money for either the rabbit or the bike. She decided to buy the
bike because then she could ride bikes with her friends after
school.
Slide 19
Opportunity cost is the process of choosing one good or service
over another. The item that you dont pick is the opportunity cost.
The rabbit is Saras opportunity cost and the skateboard is Andys
opportunity cost. Opportunity Costs Purchases
Slide 20
What is a profit? What Andy didnt realize when he bought his
basketball net was that the toy store owner made a large profit off
of the sale. The toy store owner spent $30.00 to make the
basketball net. Andy bought it for $50.00. The toy store owner made
a profit of $20.00.
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What is a profit? Profit is the positive gain from an
investment or business after subtracting expenses (opposite of
loss)
Slide 22
What is a loss? The toy store owner lost money when Sara
purchased the bike. The owner made the bike for $80.00, but sold it
to Sara for only $65.00. The toy store owner lost $15.00.
Slide 23
What is a loss? A loss is when the amount of money a person or
company spends is more than they receive or take in. (opposite of
profit)
Slide 24
After the children left the toy store I decided to stay and
have a look around. In the front of the store there was a
magnificent toy car. Wow, I exclaimed, What a neat car! Did you
make it yourself? The toy store owner explained that it was
designed by a car company, put together by Mattel, a toy company,
and painted by himself. Painting is my specialty, he said.
Slide 25
What is specialization? The toy store owner counted on others
to do the necessary work to construct the toys he sold, but then he
would paint the toys himself. Specialization is when an individual
or a company specializes in doing one part of a task, and relies on
others to complete the other parts.
Slide 26
What is interdependence? Interdependence is when people depend
on one another. Specialization results in interdependence.
Slide 27
I said goodbye to the toy store owner and continued on my walk
through town. I passed the elementary school as I rounded the
corner. Public schools are services provided by the government and
paid for by taxes. Johnson Elementary School
Slide 28
What are taxes? n Taxes are the money that the government
collects from individuals and businesses to pay for public goods
and services. n Andy and Sara both paid a 4.5% sales tax when they
bought their toys. Andy paid an extra $2.25 in tax, for a total of
$52.25. Sara spent $2.93 in sales tax for a total of $67.93. n
People also pay an income tax. An income tax is a percentage of
money taken out of your income.
Slide 29
I passed the school and saw my friend Cole walking down the
street. How are you today?, I asked Cole. I am fantastic! I just
thought of a new idea: a bowling ball that expands as you throw it
so that it is guaranteed to knock down every pin! I am going to be
famous!
Slide 30
What is an entrepreneur? Cole is an entrepreneur. An
entrepreneur is a person who comes up with a product or service, or
a better way to produce one. He found the resources, the money, and
the time to produce a new product.
Slide 31
This completes my lesson on economics! I hope you enjoyed the
tour. Economics is an important part of our lives. Think of all of
the ways you use economics everyday! Goodbye!
Slide 32
Economic Terms Review Matching Strips
Slide 33
What is Economics? Every society has productive resources:
Land/ Natural Resources Human Capital/Labor Capital/Tools
Entrepreneurship
Slide 34
What is Economics? Productive Resources are used to produce:
Goods Services
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35 However, because of SCARCITY, choices must be made to answer
the Three Basic Questions of Economics. 1.What goods and services
will be produced? 2.How will the goods and services be produced?
3.Who will consume the goods and services? What is Economics?
Slide 36
Economic Systems
Slide 37
A Country must decide how to distribute its resources to meet
the needs of its people. How a country makes these decisions
determines its type of economic system.
Slide 38
An Economic System is the way a society organizes the
production, distribution, and consumption of goods and
services.
Slide 39
Vocabulary Break In small groups, sort the pictures provided as
examples of production, distribution, or consumption
Slide 40
Economic Systems There are 3 basic types of economic systems
that have to answer three basic questions: (1)What to produce?
(2)How to produce? (3)For Whom to produce?
Slide 41
Economic Systems WHAT TO PRODUCE? (What kinds of goods and
services should be produced?) HOW TO PRODUCE? (What productive
resources are used to produce goods and services?) FOR WHOM TO
PRODUCE? (Who gets to have the goods and services? The way a
society answers these questions determines its economic
system.
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Types of Economic Systems: 1. Traditional Economy 2. Command
Economy 3. Market Economy
Slide 43
Follow teacher instructions to create your Economic Systems
Foldable to use for note-taking
Slide 44
Traditional Economy An economic system in which economic
decisions are based on customs and beliefs People will make what
they always made & will do the same work their parents did
Exchange of goods is done through Bartering: trading without using
money
Slide 45
Traditional Economy Who decides what to produce? People follow
their customs and make only what is needed to take care of oneself
Who decides how to produce goods & services? People grow &
make things the same way that their ancestors did For Whom are the
goods & services produced for? Self and trading purposes
(people in the village who need them)
Slide 46
Traditional Economy Examples: Villages in Africa and South
America; the Inuit tribes in Canada; the caste system in parts of
rural India Strengths: Predictable job and lifestyle Weaknesses:
Lack resources and limited production
Slide 47
Distributed Summarizing Draw an illustration in your foldable
that represents a Traditional Economy.
Slide 48
Command Economy Government makes all economic decisions &
owns most of the property Sometimes called communism Examples:
Cuba, former Soviet Union, North Korea This system has not been
very successful & more and more countries are abandoning
it
Slide 49
Command Economy Who decides what to produce? Government makes
all economic decisions Who decides how to produce goods and
services? Government decides how to make goods/services For Whom
are the goods and services produced for? Whoever the government
decides to give them to
Slide 50
Command Economy Strengths: people do not have to worry about
employment, housing, education, and healthcare Weaknesses:
consumers own nothing, no choices/freedom, limited innovation by
individuals
Slide 51
Distributed Summarizing Draw an illustration in your foldable
that represents a Command Economy.
Slide 52
Market Economy In a market economy, buyers and sellers answer
the three economic questions All resources are privately owned Who
decides what to produce? Whatever the market demands that will
produce a profit Who decides how to produce goods and services?
Private producers (businesses) For Whom are the goods and services
produced for? Consumers who demand the product and are willing to
pay
Slide 53
Market Economy Strengths: People can start their own
businesses, more choice Weaknesses: The desire for money may lead
to poor quality of goods and services, business owners have to risk
losing money
Slide 54
Distributed Summarizing: Draw an illustration in your foldable
that represents a Market Economy.
Slide 55
Distributed Summarizing: Economic System Quotes
Slide 56
Mixed Economy Market + Command = Mixed There are no pure
command or market economies. To some degree, all modern economies
show characteristics of both systems and are often referred to as
mixed economies. Most economies are closer to one type of economic
system than another For example, businesses own resources and
determine what and how to produce, but the Government regulates
certain industries
Slide 57
Mixed Economy Most democratic countries fall in this category
(there are no truly pure Market or Command economies). Examples:
U.S., Brazil, Mexico, Canada, UK, etc.
Slide 58
Continuum of Economies Mixed Pure Market Pure Command
Slide 59
Summarizing Strategy Economic Systems Continuum Activity