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Centrally Planned Economy

• Centrally Planned Economies Oppose …– Private property.– Free market pricing.– Competition.– Consumer choice.

•How are these things listed different in a Free market economy?

– The central government answers the Three economic questions.•How is this different than a Market

Economy?

• Socialism – (Pres. Accused?)– the belief that wealth should be

evenly distributed throughout society.– Real equality can only exist when

political equality is coupled with economic equality.

– Economic equality is only possible if the public controls the centers of economic power.

– How is this different than the Free market?

– What are some of the potential problems of socialism?

• Communism – all political and economic power rest in the hands of a central government. – The central government answers

the three economic questions.

– Communist countries are usually autocratic / authoritarian.

– Democracy does not exist.

• CORRELATE – – Exercise –

•Quickly read the pages 38 & 39.

• Exercise – “If it’s in blue I may ask you!!!!!!!!!!”– Quickly read the pages 38 & 39.

•What key terms under the Free Market Economy are absent in the Centrally Planned Economy?

– Self-interest

– Competition

– incentive

– Invisible hand

– Consumer sovereignty

• Exercise – “If it’s in blue I may ask you!!!!!!!!!!”– Quickly read the pages 38 & 39.

•What key terms from chapter one section one are absent. Why?

– wants

– entrepreneur

•What key terms from chapter one section one are present. Why?

– All terms in section 2

– All terms in section 3

– All but two terms in section 1

MIXED ECONOMIES

• How do goods, services, needs, wants, self-interests, safety nets, guns & butter, human capital, etc. create a need for a mixed economy?

• Do you agree with Adam Smith’s Laissez-faire philosophy? Why or why not?

• In a Mixed Economy… – Government provides services that

an entrepreneur normally would not consider providing.•An Army•Welfare•Education for all.•Public services.•Police protection

– Government helps to regulate the practices of businesses to protect the consumers.

• In a Mixed Economy..– Needs that markets could meet fall

to government so that all members of society can participate.

– government creates laws protecting property rights and patent laws giving people the incentive to develop new products.

– Government create laws to promote competition preventing monopolies.

• In a Mixed Economy…– some economic goals are better met

by government action.

• Mixed economies are characterized by Free enterprise – an economic system characterized by private or corporate ownership of capital goods.

• A Continuum is a range of economies with no clear divisions.– Government control can range from

total control to very little control.

Labor & human capital

Goods & services

Factor payments

Wages. Money flow

Money flows back into the factory

FACTOR MARKET

PRODUCT MARKET

Labor & human capital

Goods & services

Factor payments

Wages. Money flow

Money flows back into the factory

FACTOR MARKET

PRODUCT MARKET

GovernmentGoods & serv Goods & serv