economic systems. what is an economic system? an organized way of providing for the wants and needs...
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Economic Economic SystemsSystems
What is an economic What is an economic system?system?
An organized way An organized way of providing for the of providing for the wants and needs of wants and needs of the peoplethe people..
The way a society The way a society answers the three answers the three basic economic basic economic questions questions determines the type determines the type of economic system of economic system it has.it has.
Traditional EconomyTraditional Economy
Answers to basic questions come from Answers to basic questions come from custom, religion, ritual.custom, religion, ritual.
Examples : African Mbuti, Australian Examples : African Mbuti, Australian Aborigines, Inuits of Canada.Aborigines, Inuits of Canada.
Advantages/Disadvantages Advantages/Disadvantages of Traditional Systemof Traditional System
*Advantages : everyone knows what *Advantages : everyone knows what role to play; little uncertainty exists.role to play; little uncertainty exists.
*Disadvantages : discourages new *Disadvantages : discourages new ideas, lack of progress, lower ideas, lack of progress, lower standard of living.standard of living.
Command EconomyCommand Economy
Basic questions are answered by a central Basic questions are answered by a central government.government.
Examples : North Korea, CubaExamples : North Korea, Cuba
Advantages/Disadvantages Advantages/Disadvantages of a command economyof a command economy
Advantages : can change drastically Advantages : can change drastically in a short time; many services in a short time; many services offered at little or no cost.offered at little or no cost.
Disadvantages : does not meet Disadvantages : does not meet needs of people; no incentives; large needs of people; no incentives; large bureaucracy; new ideas bureaucracy; new ideas discouraged. discouraged.
Market EconomyMarket Economy
Basic Basic questions are questions are answered by answered by people and people and firms acting in firms acting in their own best their own best interests.interests.
Examples : Examples : United States, United States, Canada, Japan, Canada, Japan, SingaporeSingapore
Advantages/Disadvantages Advantages/Disadvantages of the Market Systemof the Market System
Advantages : can adjust Advantages : can adjust to change gradually; to change gradually; individual freedom; individual freedom; variety of variety of goods/services; lack of goods/services; lack of government government interference.interference.
Disadvantages : Disadvantages : rewards only productive rewards only productive resources; basic needs resources; basic needs not met for everyone; not met for everyone; some uncertainty.some uncertainty.
Evaluating Economic Evaluating Economic PerformancePerformance
Economic and Social GoalsEconomic and Social Goals
Economic EfficiencyEconomic Efficiency
How well How well scarce scarce resources are resources are used; keep used; keep production production costs as low costs as low as possible.as possible.
Economic EquityEconomic Equity
FairFair Distribution of Distribution of
income and wealthincome and wealth Equal opportunityEqual opportunity
Plaintiffs in class-action suit against WalMart
Economic FreedomEconomic Freedom
Freedom forFreedom for ConsumersConsumers WorkersWorkers individualsindividuals
Economic GrowthEconomic Growth
**Increasing the Increasing the production of production of goods and goods and services over services over time (GDP time (GDP growth)growth)
Economic SecurityEconomic Security
Protect Protect consumers, consumers, producers, and producers, and resources from resources from risks that exist risks that exist in societyin society
(recession, injury, (recession, injury, unemployment, unemployment, etc.)etc.)
Economic StabilityEconomic Stability Maintain Maintain
stable pricesstable prices Full Full
employmentemployment
Trade-offs among goalsTrade-offs among goals
Sometimes there is conflict between Sometimes there is conflict between goals. goals.
Example : raising the minimum Example : raising the minimum wagewage
Equity v. price stabilityEquity v. price stability
Which goals would be Which goals would be served?served?
Which goals restricted?Which goals restricted? A 10% tax is placed on the use of A 10% tax is placed on the use of
tanning booths. Now Snooks has to tanning booths. Now Snooks has to spray-tan.spray-tan.
New rules for unemployment benefits New rules for unemployment benefits limit the length of time individuals limit the length of time individuals can receive unemployment checks.can receive unemployment checks.
Capitalism and Economic Capitalism and Economic FreedomFreedom
A free enterprise economy has five A free enterprise economy has five main characteristics:main characteristics: Economic freedomEconomic freedom Voluntary exchangeVoluntary exchange Private property rights Private property rights Profit motive (incentives)Profit motive (incentives) CompetitionCompetition
The economic system of The economic system of the U.S.the U.S.
In the United States, our economic In the United States, our economic system issystem is
-primarily a -primarily a marketmarket system…. system….
……with some elements of with some elements of traditiontradition……
……and some elements of and some elements of commandcommand……
……so it is more accurately called a so it is more accurately called a mixedmixed market economy, or market economy, or modified modified free enterprise economyfree enterprise economy..
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