WHAT ECONOMISTS DO2-1
Journal (8-31 Warm-Up)
Write about your goals. What do you hope to accomplish in high
school? What do you hope to accomplish beyond
high school? Where do you see yourself in 10 years?
BIG IDEAS
1)What are the 3 questions that all economic systems answer?
2) What are the major types of economic systems?
Different Economic Systems
Economic systems ways in which countries use their resources to satisfy needs and wants
Countries must make decisions on how to distribute limited resources just like people (opportunity cost, scarcity)
3 questions are considered…
3 Basic Questions
1) What to produce?
2) How to produce?
3) For whom to produce?
What is a Model
An economic model is a way of grouping or organizing different theories on how the economy should be run.
4 Economic Models
1) Traditional Economy Based on societies values You do what you saw people doing when you
grew up Farming or fishing Developing countries
4 Models Cont’d.
2) Command Economy Rulers or people in authority decide which
products will be produced Factors of production are owned by PEOPLE OF
AUTHORITY (government) Use the internet to research the feudal
system and be prepared to answer how it is an example of a command economy
4 Models Cont’d.
3) Market Economy Government has NO say in what, how and for
whom goods are produced Factors of production are owned by INDIVIDUALS Goods traded on a market – place where goods
and services are traded Adam Smith
Scottish economist and philosopher Self interest unregulated markets will be
shaped by people’s self interests Since it’s the will of the people and NOT the
government, peoples SELF INTERESTS are fulfilled
Example of Benefit of Market Economy
You’re newspaper carrier. Why did you accept this job? A) You believe that everyone deserves a
newspaper B) It is a good newspaper and more people
should read it C) You get paid to deliver newspapers
Example Cont’d.
Most said “C” Good for you and people get to read the
newspaper What would be different if the
government regulated how many newspapers could be sold?
Market economy gives incentives something that encourages you to behave a certain wayh
4 Models Cont’d.
4) Mixed Economies combines traditional, market and command economic models
3 Types of Mixed Economies 1) Communism government owns or
controls nearly all factors of production/very little decision making for individuals Closest to command economy
3 Types of Mixed Economy Cont’d.2
2) Capitalism Individuals own the factors of production Limited government intervention
Closest to market economy
3) Democratic Socialism Government owns some factors of production
– usually utilities In between capitalism and communism
Economic System
What to Produce
How to Produce
For Whom to Produce
Example
TRADITIONAL
COMMAND
MARKET
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