Market vs. Command

Freedom of choice We decided what to produce

Prices determined by supply and demand

Competition Quality/variety of products

Private property rights We own the businesses and

make the decisions Profit motive

You get to keep the $ you make as a business

Resources used more efficiently

Government decides what to produce

Government sets the prices Usually low which causes

a shortage No competition

Low quality products and no variety

Government owns the resources and the businesses

Resources are wasted Cuba & North Korea

Mixed

A combination of market and command

Individual freedoms AND government intervention

United States, China, and many others

many countries have some version of a mixed economy.

Pure market economies really don’t exist as no market has total freedom from government involvement

International Trade

26.1

Why Do Nations Trade?

Countries do not produce everything they need, so they import (purchase goods from other countries) to get what they need.

They also export (sell goods to other countries) so other countries have what they need

Trade is a way to solve the problem of scarcity

Comparative Advantage

This is the ability of a country to produce a good at a lower cost than another country can.

This allows countries to specialize in producing what they are good at!

They then keep what they need and export the rest to other countries

Restrictions

Tariffs (a tax on an imported good) are used to decrease imports into a country to protect their own product and sale of a good.

Quotas (a limit on the amount of goods that can be imported) are also used to block imports.

Free Trade

Free Trade is designed to help countries trade without tariffs, quotas, or other restrictions. Which makes trade easier.

Free Trade

NAFTA: North American Free Trade Agreement Free trade between Canada, U.S., and Mexico

WTO: World Trade Organization Oversees trade among nations

EU: European Union European Nations that have no trade barriers between them Goods, services, and even workers move freely between the

nations Common currency- Euro

Financing Trade

Balance of trade is when a countries imports equals its exports. They break even!

Trade Surplus is when a countries exports are greater than it’s imports. They sold more than they bought!

Trade Deficit is when a countries imports are greater than their exports. They bought more than they sold!

Work Time

Finish your vocab. 23.1, 23.2, 26.1, 26.2

Finish your Test study Guide.

Test Tuesday! Use this time to study!