Chapter Two: Economic Systems & Decision Making
Warm Up Question:(write answer in notebook with today’s date)
What are the Three Basic Questions of Economics?
Unit I: Basic Principles of Economics
• What do we call the place where buyers and sellers come together?
• This concept is a vital aspect to our economic system. It allows the free exchange of g&s and the producers and consumers have the power.
Unit I: Basic Principles of Economics
• ECONOMIC SYSTEM: an organized process to DECIDE how to use SCARCE RESOURCES to satisfy needs and wants.
• 3 Types of Economic Systems:1. TRADITIONAL Economy:2. COMMAND Economy:3. MARKET Economy:
What do each of these words
mean to you? Brainstorm with
group
Move to a clean sheet in notebook:we need to make a tableECONOMIC SYSTEMS
headin
gMARKET COMMAND TRADITIONAL
Make it for the whole page; we will add in the rows as we go along together and then in groups!!
Unit I: Basic Principles of Economics
MARKET Economy
Command Economy
TRAD-ITIONAL Economy
The past dictates, customs decide
Gov’t Decide
s
Consumers &
Producers decide
WHO answers the
3 BASIC QUESTIONS?
Unit I: Basic Principles of Economics
MARKET Economy
Command Economy
TRAD-ITIONAL Economy
Inuit (Eskimo), Aboriginal (Australia), African & Amish Villages
Cuba, China, N.Kore
a
USA, Canada, Japan,
most of Europe
WHERE do these
systems exist in the
world?
Unit I: Basic Principles of Economics
MARKET Economy
Command Economy
TRAD-ITIONAL Economy
ADVANTAGES
Split Rest of Table for 2 last rows
DIS-ADVANTAGES
PAGE 33
Traditional Economy
Advantages
•Always KNOW ROLE in society•STABLE and predictable life•BASIC NEEDS provided
Dis-advantages
•LOWER STANDARD of living•WANTS are not met•NEW IDEAS discouraged•LACK of progress, NO CHANGE
Command Economy
Advantages
•Always KNOW ROLE in society•Capable of DRAMATIC change•BASIC NEEDS provided
Dis-advantages
•Has LITTLE FLEXIBILITY to deal with small day-to-day changes•NEW IDEAS discouraged•Requires large GOVERNMENT•WANTS are not met•NO INCENTIVES to get people to work
Market Economy
Advantages
•Decentralized decision making; bottom up•Able to ADJUST TO CHANGE gradually•Incredible VARIETY of g&s; many choices•Lots of FREEDOM & CHOICE (jobs, g&s)•LACK of GOVERNMENT interference
•High degree of CONSUMER SATISFACTION
Dis-advantages
•People face UNCERTAINTY & FAILURE•Does not meet NEEDS of PEOPLE (homeless, hungry, uneducated)•Rewards only productive resources•Must guard against market failure
Group Activity ~ Relay
• Can you decipher what the advantages and disadvantages of each of these systems would be?
• Let’s see if you can work through it!!
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