Standard:12e2.3 Explain the roles of property rights, competition and profit in a market economy
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Standard:12e2.3
Explain the roles of property rights, competition and profit in
a market economy
ESLR-Analytical Thinkers
Collaborative Workers
Effective Communicators
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Chapter 2 Section 1 Terms Traditional economy Command economy Market economy Self-interest Incentive Mixed economy Authoritarian socialism Capitalism Democratic socialism
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Objectives
Explain how the three basic economic questions are answered in traditional, command, and market economies
Describe the roles of self-interest and incentives in a market economy
Describe the types of mixed economies that exist today
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Your school
Which factors influence economic
decisions in your school? Who makes these decisions? What are these decisions based on?
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The United States
Which factors influence economic
decisions made in your country? Who makes these decisions? What are these decisions based on? Would these answers be different in
other countries?
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Pure Economic Models
Traditional Economies- tradition and customs answer the 3 basic questions:“For Whom to Produce” “What to produce”? “How to Produce”
Command- government officials, central planners
Market- individuals, free exchange of goods and services.
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Adam Smith
The market is driven by self-interest. People work to fulfill their needs and wants.
The invisible hand should regulate the economy.
Also known as laissez-faire economics
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How do we decide what is in our self-interest?
The Market offers incentives – these encourage you to act a certain way.
Sometimes incentives are rewards, sometimes punishments.
Can you think of an incentive that
brought you to school today? A
negative incentive?
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All economies today are “mixed”
Mixed economies blend the elements of traditional, command and market types
They are:
Authoritarian Socialism
Capitalism
Democratic Socialism
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Authoritarian Socialism
Also known as Communism Government owns or controls nearly
all the factors of production
REVIEW- What are the 4 factors of production?
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Karl Marx Felt that life was a
struggle between the bosses (bourgeoisie) and the workers (proletariat).
Workers should run things and split the profits, they should get rid of the bosses
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Capitalism
Individuals own the factors of production They answer the basic economic
questions Government does play a role. They provide services like health care and defense. Government also regulates industry. For
example, safety standards at your job.
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United States, Canada, Mexico, Japan are Capitalistic countries
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Democratic Socialism
Falls in between Communism and Capitalism
Government owns SOME of the factors of production such as utilities
Individuals control the rest of the factors of production, there are incentives and choice just like in Capitalism
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Smith vs. Marx
In teams of 3-4 Divide the 2 readings “The Wealth of Nations” and “Das Kapital”
Each team member should read and summarize ½ of an article.
All team members discuss and answer Question #2 on each reading.
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