ECONOMIC SYSTEMSINTRO TO BUSINESS

COACH CURTIS – COLLIERVILLE HIGH

Chapter 2

Three key economic questions to be answered;

What goods and services are to be produced?How should the goods and services be

produced?For whom should the goods and services be

produced?

Who will benefit?

Determining which of its citizens should benefit from the production of goods and services is something each nation must decide.

3 TYPES OF ECONOMIC SYSTEMS

Custom-based: Goods are produced the same way *Amazon Tribes

Directed (Planned) Economy

Owned and controlled by the government: Cuba China Communist countries

Market Economy

The three questions are answered. Individuals free to engage in business

transactions. Usually found in democratic government: USAJapanCapitalist Countries

Mixed Economy

Most countriesCombine Government and Private OwnershipUSAPost-officeSchoolsTown of Collierville (Water/Trash Bill)

CAPITALISM

Economic resources are usually privately owned by individuals rather than by the government.

Individual owners free to decide what they will produce with the resources.

Voluntary Exchange

MARKET

Arrangement that allows buyers and sellers to come together to trade goods, services and resources

MARKETPLACE

Any place where buyers and sellers exchange goods, services, and some form of money.

Example: When government hires new employees they receive human resources in exchange for compensation.

PRIVATE PROPERTY

The right to own, use and dispose of things of value

VOLUNTARY EXCHANGE

The act of buyers and sellers freely and willingly engaging in market transactions.

Free or Private Enterprise

You may start or invest in any business as long as it is legal to do so.

PROFIT

The money left from sales after subtracting all the costs of operating the business.

Run a risk of losing invested moneyOwners face extra hoursStress

Competition

Rivalry among businesses to sell their goods and services to buyers

The reason for advertisementBuy “new” and “improved” productsWho else is using their productDog eat dog world

Freedom of Choice

Enter the business you want to enterSelect the career you want mostEarn a profit by competing in business

PROFIT MOTIVE

Work HardBe CreativeEarn MoreInvest moreNew Products

FREEDOM OF CHOICE

Right to enter business or career of your choice

Own propertyMake profitCompete

Government Regulations

Not pure capitalismPrevention of harming othersExample: Can not dispose of chemical

wasteCan’t practice surgery unless you have been

granted a medical license by the appropriate agency

Previously controlled economies “new rights”

The right to earn a fair profitThe right to do business with minimal

government regulationThe rigth to fail

Complete Questions

An establishment or enterprise that supplies goods and services in exchange for some form of payment is _______________

The key economic questions must be answered because resources are _________________

A place where __________ and __________ exchange goods and service for money is called the marketplace.

The second question in the key economic questions is: _______ should the goods and services be produced.

The third question in the key economic questions is ____ ___ should the good and services be produced.