C H. 2: E CONOMIC S YSTEMS S1: Answering the 3 Economic Questions S2: The Free Market S3: Centrally...
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Transcript of C H. 2: E CONOMIC S YSTEMS S1: Answering the 3 Economic Questions S2: The Free Market S3: Centrally...
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CH. 2: ECONOMIC SYSTEMS
S1: Answering the 3 Economic Questions
S2: The Free Market
S3: Centrally Planned Economies
S4: Mixed Economies
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BELL WORK
Get books/folders ready Copy Chart on page 23 somewhere in notes
Fill this in as we go along in notes Will help give you an overview of section
Answer Chapter 2 Warm-up Pg. 12 A-D
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2.1: ANSWERING 3 ECONOMIC QUESTIONS
Chapter 2 Essential Question
“How does a society decide who gets what Goods/Services”
Section 1 Guiding Question“What Goals/Values affect how a society
answers the key economic questions?” S.1 Objectives:
3 Economics questions Societal values that determine how they are answered Characteristics of Traditional Economy
Key Terms http://www.pearsonsuccessnet.com/snpapp/iText/prod
ucts/0-13-369833-5/Flash/Ch02/Econ_OnlineLectureNotes_ch2_s1.swf
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INTRODUCTION
Goals/values that affect how a society answers key ?s Each society is guided by its economic system
Affects the way it does business w/in society and w/other societies
A societies values, such as freedom or tradition, guide the type of economic system they will have
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3 ECONOMIC QUESTIONS
B/C of scarce resources a society must answer 3 ?s What goods/services should be produced?
How should these goods/services be produced?
Who consumes these goods/services?
How ?s are answered defines type of economic system society has
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QUESTION 1 & 2
What goods/services should be produced? Society must decide what to produce in order to
satisfy wants/needs of its people Because of scarcity (limited resources), each
decision comes at an opportunity cost How should goods/services be produced?
As a society decides, it considers…… How to best use its 3 factors of production
Land Labor Capital : human/physical
Look at Figure 2.1 on pg. 24 (read/answer TPS) What does each choice involve?
Trade-offs
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QUESTION 3
Who consumes goods/services? Mostly determined by how a
society distributes income Through factor payments,
including profits, society can determine who will be consumers of goods/services How much will owners make,
teachers, bankers, etc. Answer can tell a great deal
about societies values
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ECONOMIC GOALS
Efficiency
Freedom
Security
Equity
Growth
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ECONOMIC EFFICIENCY
Societies answer 3 ?s based on importance they attach to their economic goals
Scarce resources make societies try to maximize what they can produce using their resources If they can accurately
assess what to produce they can increase their efficiency
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ECONOMIC FREEDOM AND SECURITY
Some societies limit the economic freedoms of its people U.S., we face some limitations, but in general, we
have a lot of freedom Economic systems also strive to achieve a
degree of economic security Basically, systems are there to reassure people
that goods/services will be available and they will get paid for work as well
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ECONOMIC EQUITY AND GROWTH
Another goal that is defined differently in different societies. Basically how they will divide their “pie”
Checkpoint: “What are 2 examples of economic goals?”
Growth: Economies need to grow Need to provide jobs for new people in workforce Strive to improve standards of living Innovation plays a large role in economic growth
and success
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FINISH 1.1
BW Complete pg. 13
Exploration; Both A and B
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ECONOMIC GOALS IN CONFLICT
There are some additional economic goals for certain societies Environmental protections Full employment Protecting national industries
Societies end up having to prioritize their economic goals (arrange them in order of importance) Each choice comes with some kind of trade-off
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TRADITIONAL ECONOMIES
Oldest and simplest economic system Rely on habit, custom, or ritual Revolve around family Little room for innovation/change
Found in communities that… Stay small and close Work to support entire community over selves
Success is judged by how they meet their own needs Often lack modern conveniences Lower standards of living
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LESSON CLOSING
HW and some of BW tomorrow Page 55
Evaluating U.S. Economy Read Section 2
Complete ALL of SECT 1 GUIDED READING/REVIEW Get started on Sect. 2 GUIDED READING/REVIEW
Fill in S1 Chart on top of notes.
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CHAPTER 2 BELL-WORK
Get Books/Folders
Finish up pg. 55
Copy chart for S2 to top of notes or sheet
Fill in Chart from section 1 that you copied Go over answers
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CHAPTER 2 : SECTION 2
“What are the characteristics of a free-market economy?” write on top of notes
Objectives Explain why markets exist Analyze a circular flow model of a free-market
economy Describe self-regulating nature of marketplace Identify advantages of free-market economy
Key Terms http://www.pearsonsuccessnet.com/snpapp/iText/products/0-13-36
9833-5/Flash/Ch02/Econ_OnlineLectureNotes_ch2_s2.swf
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INTRODUCTION
What are the characteristics of Free-market economy? Characterized by…..
Households and firms Factor and product markets Self-interest Competition Economic freedom, efficiency, and equity
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WHY DO MARKETS EXIST?
Markets exist to eliminate the need for any one person to be self-sufficient Examples: NYSE, Farmers markets, Scheel’s, Wal-Mart They allow us to exchange the things we have for
things we want Money for goods/services in most cases
Lead to specialization Rather than self-sufficiency, we specialize in a few
products/services Leads to efficient use of 3 factors of production Allows businesses to focus on limited number of
related products/services Markets are needs as an arena to buy/sell
products
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FREE MARKET ECONOMY 3 ?s answered by voluntary exchanges in
Marketplace Individuals choose
What gets made How it is made How much people can consume of good/service
Individuals/Private businesses own factors of production
Look at figure 2.2 pg. 31 Need to understand what each sector provides
one another Answer two questions…. TPS
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FACTOR AND PRODUCT MARKETS
Factor Market Firms purchase factors of production
Renting/buying land, hiring/paying workers, borrowing $$
Product Market Arena where households buy good/services a
firm produces Checkpoint:
What is the role of firms in the free-market economy? Firms buy factors of production from households, then
uses them to produce goods/services
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SELF REGULATION
Wealth of Nations Adam Smith observed countless transactions in
marketplace that showed…. Buyers/Sellers only consider their self-interests
Smith’s take Positive incentives of lower prices causes more buying
B/C opportunity cost of the purchase is lowered
Regulations Self-interest is the motivating force in the free-
market Consumers pursue their self-interest by looking for
lower/lowest prices
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SELF-REGULATION
Competition Firms seek to make higher profits by increasing
sales Competition among firms makes increasing sales
not always possible
Self-interest and competition work together to regulate the marketplace
Smith called this the “Invisible Hand”
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ADVANTAGES OF FREE MARKET
“Perfect Conditions” lead to meeting these goals Read aloud…. Pg.34 Efficiency
Rapid response to changing conditions Freedom
Large degree of economic freedom Growth
Encouragement of economic growth Lend themselves to consumer sovereignty
Consumers have power to decide what gets produc
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ANSWER THE QUESTION TO CAPTION ON PG. 32
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LESSON CLOSING
Workbook Pg. 14 Pg. 63
Quick Video over Market Vs. Command System: DONE
HW Read Section 3 Finish up pg. 63 Activity
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CHAPTER 2 SECTION 3
Get books/folders
Finish up Pg. 63 from workbook
Copy down chart from section 3
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CHAPTER 2 SECTION 3
“What are characteristics of centrally planned economy?” write in
notes
Learning objectives How centrally planned economy is organized Distinguish between socialism and communism Analyze the use of central planning in Soviet
Union and China Identify disadvantages of centrally planned
economy Key Terms
http://www.pearsonsuccessnet.com/snpapp/iText/products/0-13-369833-5/Flash/Ch02/Econ_OnlineLectureNotes_ch2_s3.swf
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INTRODUCTION
What are characteristics of a centrally planned economy? The Government answers the 3 economic
questions Govt. owns factors of production Opposition to private property, free-market
pricing, competition, and consumer choice
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HOW CENTRAL (COMMAND) WORKS
Govt., rather than indiv’s answers key economic ?s Govt. owns both land and capital Govt. controls where people work and their pay
Operate in contrast of free-market Oppose major concepts of Free-market
Private Property Free-pricing Competition Consumer choice
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SOCIALISM VS. COMMUNISM• Wealth distribution• Equity only thru govt. or public
ownership• Market Socialism is a combo where
govt. uses taxes to helpSocialism
• Govt. controls all resources/means of production
• Capitalism is exploitation of workers for fewCommunism
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TWO COMMUNIST ECONOMIES
Soviet Union 1st communists state in 1917; lasted till 1991
Wanted to build power/prestige Dedicated best LLC to heavy industry
Greatly effected factories of consumer goods Led to recurring shortages for lots of goods
China (1949-70s) Govt. controlled all aspects of Chinese economy Took over farming too, forced people into farming
communities Led to shortages form decreased farm production Eased control in 70s of most aspects
More economic freedom has allowed China to grow
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DISADVANTAGES OF PLANNED
Often have trouble meeting the basic economic goals Decreases efficiency, poorly adjustable to market
changes Minimal economic freedom Innovation/creativity not rewarded, limits growth No equity
Can help jump-start a small economy or sector of. Guarantees jobs/incomes to people
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LESSON CLOSING
Read Socialism in classroom What do you think would happen in this
classroom In other classroom that may be different than
this room TPS on some good/bad things that a
planned/control economy may offer Complete
Workbooks Pg. 71: comparing soc/comm. Pg. 15
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CHAPTER 2 SECTION 4
BW
Grab books/folders
Finish any of pg. 71 in workbooks
Copy chart on pg. 39
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CHAPTER 2 SECTION 4
“What are the characteristics of a mixed economy?” Write at top of notes
Learning objectives Explain rise of mixed economies Interpret circular flow model of mixed economy Compare mixed to other types Describe role of free enterprise in U.S. economy
Key Terms http://www.pearsonsuccessnet.com/snpapp/iText/products/0-13-3
69833-5/Flash/Ch02/Econ_OnlineLectureNotes_ch2_s4.swf
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INTRODUCTION
What are the characteristics of a mixed economy? Market based economy w/ some govt.
intervention Govt. helps societies meet needs too difficult to
meet in Free-market Example: Education
Govt. protects property rights and ensures that exchanges in marketplace are fait
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RISE OF THE FREE-MARKET
Even “pure” “free-marketers” understand the need for some govt. involvement
Mixed economy has a free-market, but also a certain degree of govt. control
Why govt.? Need to provide all members of a society some
basic needs Nat’l Defense, public education Protect private property Ensure fairness of exchanges in marketplace
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GOVERNMENT IN THE MARKET
Govt’s buy labor in the factor market to have employees help run its programs
Governments purchase goods/services from firms in product market
Governments also collect taxes from both households and firms
Look at figure 2.4 on pg. 40 Answer questions……….. TPS
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MIXED ECONOMIES W/HIGH GOVT. INTERVENTION: PG. 41
North Korea; represents one extreme Economy is almost totally dominated by Govt. Govt. owns all the property and output equipment
China Closer to middle b/c they are going through an
economic transition toward privatization
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MIXED ECONOMIES W/LITTLE GOVT. INTERVENTION & U.S.
Hong Kong Represents one of world’s free-est markets Private sector is “king” Little govt. interference
Est. wage/price controls on rent and public services
U.S. Mixed economy w/Free-market foundation Characterized as a free-market system Look @/answer caption on page 43
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US ECONOMY
Govt. intervenes in economy by……… Keeping order Providing vital services Promoting general welfare
Federal/state laws help protect private property Marketplace (place to exchange goods/services)
operates with limited degree of govt. regulation Economic Freedom
Very high level of freedom Foreign investment/free trade encouraged Banking industry operates under few restrictions
Foreign banks have fewer restrictions
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LESSON CLOSING
Case Study: Look at Wall Street Video Edition Look at Essential Questions Video Complete the following
Workbook pgs. 16-19 Pg. 77 (FDA)
When done, finish up any of other workbook assigned pages
Grab Ch. 2 Study Guide