Economic SystemsUNIT ONE: BASIC ECONOMICS CONCEPTS

Bell Ringer

What type of economic system does the United States have?

What are some good and bad effects of this system that can be seen in our country?

Economic Systems!

Three economic questions:1. What goods will be

produced?

2. How will the goods be produced?

3. For whom will the goods be produced?

Major Economic Systems

Free enterprise Individuals own resources and control the use of those resources

Also called capitalism or market economy!

Socialism Government controls and owns many of the resources

Command economy is a specific type of socialism

Traditional Traditions, customs and beliefs shape the goods and services

produced by an economy

Bell Ringer

Take 5 minutes to study for your FIRST ECONOMICS QUIZ!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Write down the definitions for the following: Scarcity

Opportunity Cost

Factors of Production

What does the PPC show?

Free Enterprise

Advantages Encourages competition and quality goods

Incentives for individuals and businesses

Lower prices and more variety of goods/services

Disadvantages Wealth gap—rich get richer while the poor get poorer

Large companies may monopolize markets

Competition for inexpensive goods may lead to exploitation of workers

Socialism/Command

Advantages Wealth equality

Maximizes social welfare over individual profit

Disadvantages Government isn’t omniscient—anticipating the needs of the public is

nearly impossible

Lack of competition—no incentive for producers to be more efficient or produce high-quality goods

Traditional Economies

Advantages: Most members of society have specific role in

economy (cooperation)

More environmentally sustainable than modern economic systems

Disadvantages: Vulnerable to weather changes and natural

disasters

Vulnerable to more powerful market or command economies who may take or damage natural resources

Mixed Economies Allow more freedom than command

economies EX: Possess the means of production,

participate in managerial decisions, make decisions about labor and output

High level of state participation and spending EX: Tax-funded libraries, schools, roads,

utilities, welfare, social security

Various restrictions on business are made for the greater good EX: Environmental regulation, labor

regulation, antitrust and intellectual property laws

Mixed Economies

Advantages Private competition encouraged

Protection of intellectual property (sometimes)

Social “safety net” programs

Disadvantages Government directs resources toward

social programs—not always efficient and often wasteful!

Government loopholes