Bellwork: What is an Economic System? An economic system is the
method used by a society to produce and distribute goods and
services.
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How are Households similar to Society? Like an Society,
Households face many decisions. Examples? Who does which tasks? Who
cooks dinner? Who does laundry? Who chooses what TV show to watch?
Who cleans the bathroom? Like an Society, Households must allocate
its scarce resources amongst its various members, taking into
account each members abilities, efforts and desires. Like a
household, societies faces many decisions
Slide 4
Similarities Continued A society must decide what jobs will be
done and who will do them. (Farmers grow food, designers make
clothing, computer techs create software programs, etc) Both have
to decide roles in order to get things done!! Once society does
this, they must decide the output of goods and services that these
people will produce.
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What is Scarcity? Scarcity is the fundamental economic problem
of having unlimited human wants in a world of limited resources. It
states that society has insufficient productive resources to
fulfill all human wants and needs. Because of scarcity each
economic system must answer three basic economic questions. These
questions are.
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The Three Basic Economic Questions What to produce? How to
produce? For whom to produce? Each economic system answers these
questions in different ways.
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What is capital? What is a Market? Capital is wealth in the
form of money or other assets owned by a person. This could be
anything from land, money, technology/equipment, which are then
used to produce goods and services. A market is a group of buyers
and sellers of a particular good or service.
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Traditional Economic System Economic Decisions- relies heavily
on habit, custom, or ritual to answer the three economic questions.
Typically focus on one particular method of livelihood such as
hunting, agriculture and barter (exchange). Role of Government-no
specific role Ownership- None. Typically found in remote areas
around the world. (rural and farm-based).
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Examples of Traditional Many of the African countries which use
agriculture as their main basis for growing food and for jobs. In
addition some Asian countries, such as Bangladesh and Burma also
rely on farming as their main way for both employment and for
producing food for the family.
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Market Economic System Economic Decisions-Based on laws of
supply & demand. Role of Government- No Government intervention
(pure Laissez-Faire) Ownership -Owners of capital are free to
produce/sell whatever quantities of any goods for which they
believe there is a market. Example -Pure market economy does not
exists. US is closest.
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Mixed Economic System All modern economic systems are some type
of mixed system. Economic Decision - combines elements from
traditional, command, and market systems. Role of Government -Range
of some level of Government intervention. Ownership -Some
individual ownership, some government control or ownership. Some
economic systems are more heavily based upon one of the basic forms
of economic systems than the others.
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Examples of a Mixed Economy The U. S factors of production are
owned by the private sector, BUT government does get involved in
decisions: Determines what infrastructure will be built, passes
laws putting regulations on private industry (EX: minimum wage laws
and anti-pollution laws). Chinas government lets some industries be
controlled by market forces, while at the same time totally
controls other (usually larger) industries.
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Command Economic System Economic Decision - based on planning
by central government planners. Government Role -Government is
involved in all aspects of economy and makes all decisions-what to
produce, how to produce it, and who to produce it for. Ownership
-Government owns most, if not all industries and businesses.
Command economic systems are typically found within communist
political systems. Although no true command economy exists
today.
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Closest Example of Command Economy Cuba has had a communist
political system since 1959. The present Constitution also ascribes
the role of the Communist Party of Cuba to be the "leading force of
society and of the state" and as such has the capability of setting
national policy.
Slide 15
Examples of Economic systems Now that you have learned about
each type of economic system you are going to look at the examples
on your notes page and fill in the blank of each example with the
correct economic system. Then you and your group will then make up
an example for each on your own and place it in the correct
economic system category.
Slide 16
Exit Slip: Economic spectrum Now that youve learned about the
different types of modern economic systems we are going to draw an
economic spectrum on the board place the vocabulary/countries
listed in the correct places where they lie in relation from
command to market system.