2 - 1 Economic Systems Evaluating Economic Performance Capitalism and Economic Freedom Economic...
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2 - 1 Economic Systems Evaluating Economic Performance Capitalism and Economic Freedom Economic Systems & Decision Making 2 C H A P T E R
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Transcript of 2 - 1 Economic Systems Evaluating Economic Performance Capitalism and Economic Freedom Economic...
2 - 1
Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
Economic Systems & Decision Making
2C H A P T E R
2 - 2
Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
ECONOMIC SYSTEMS
THE MARKET SYSTEM
Pure Capitalism Laissez-faire
“Let it be”
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
ECONOMIC SYSTEMS
THE MARKET SYSTEMPure Capitalism Laissez-faire
“Let it be”THE COMMAND SYSTEM
SocialismCommunism
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
ECONOMIC SYSTEMS
TRADITIONAL SYSTEM– Based on habits and/or customs
–Tribal, indigenousMIXED ECONOMY
–Has elements of two or more systems.
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
TRADEOFFS
•Economic Freedom•Economic Efficiency•Economic Equity •Economic Security•Full Employment•Price-Level Stability•Economic Growth
ECONOMIC GOALS
COMPLIMENTS
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
The Market System
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
CAPITALIST IDEOLOGY
FREEDOM OFENTERPRISE
& CHOICE
PRIVATEPROPERTY
SELF-INTEREST
COMPETITION
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
MARKETS& PRICES
FREEDOM OFENTERPRISE
& CHOICE
PRIVATEPROPERTY
ACTIVE, BUTLIMITED,
GOVERNMENT
SELF-INTEREST
COMPETITION
CAPITALIST IDEOLOGY
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
GLOBAL PERSPECTIVEIndex of Economic Freedom, Selected Nations
1 Hong Kong3 Ireland
5 United States20 Belgium
31 Spain48 France101 Brazil126 China134 Russia
148 Venezuela156 Cuba
157 North Korea
FREE
MOSTLYFREE
MOSTLYUNFREE
REPRESSED
Rankings among 157 nations, 2008
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
The Three Fundamental Questions...What will be produced?
THE MARKET SYSTEM AT WORK
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
The Three Fundamental Questions...
How will the goods be produced?
What will be produced?
THE MARKET SYSTEM AT WORK
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
The Three Fundamental Questions...
How will the goods be produced?
What will be produced?
Who will get the goods and services?
THE MARKET SYSTEM AT WORK
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
Those goods and services that make a profit.
WHAT WILL BE PRODUCED?
Profit = Total Revenue – Total Cost
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
Least Cost ProductionMaximizing output while minimizing cost.
HOW WILL THE GOODS ANDSERVICES BE PRODUCED?
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
• The market determines the price.
• Those willing to pay that price receive the goods and services.
• Income is the key.
WHO WILL GET THE GOODSAND SERVICES?
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Economic Systems
Evaluating Economic Performance
Capitalism and Economic Freedom
THE CASE FOR THE MARKET SYSTEM
•Efficiency• Incentives•Freedom
