Economic Systems Chapter 2. The Three Economic Questions Every society must answer three questions:
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Transcript of Economic Systems Chapter 2. The Three Economic Questions Every society must answer three questions:
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Economic Systems
Chapter 2
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The Three Economic Questions
Every society must answer three questions:
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What goods and services should be
produced?
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How should these goods and services be produced?
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Who consumes these goods and
services?
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What are Society’s Economic
Goals?
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Economic efficiency:
Making the most of resources– Producing what people want
– Using the best known
production methods
– Making sure that goods
get to consumers
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Economic freedom:
The opportunity to make our own choices about jobs, purchases, businesses without government intervention (source of
our patriotism)
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Economic predictability:
Assurance that goods and services will be available, payments will be made on time,
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Economic security
• Knowledge that economic help is available when you need it. There is safety net that will protect individuals in times of economic disaster (unemployment, injury, disability, old age, poverty).
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Economic equity:
Fair distribution of wealth–Equity does not mean
equality but fairness.
As a society we must
decide how our economic
pie will be divided.
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Economic growth and innovation
Growth is necessary to provide an ever increasing standard of living for a growing population. Innovation leads to economic growth.
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Other goals
Societies pursue additional goals, such as
• Environmental Protection–Clean water and
clean air
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Other goals
Full Employment Universal Health Care
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Four Economic Systems
An economic system is the method used by a society to produce and distribute goods and services.
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Traditional economies rely on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it.
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In a market economy economic decisions are made by individuals and are based on exchange, or trade.
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In a centrally planned economy the central government makes all decisions about the production and distribution of goods and services.
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Mixed economies are modern economies that combine economic protections and the free market with limited government intervention.