Transcript Ch. 2.1 Economic Systems

Chapter 2-- Economic Systems
3 Basic Economic Questions:
What to make?
How to make it?
Who to make it for?
Ch. 2.1 Economic Systems
Four Types of Economic Systems:
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Traditional—Children carry on the
economic roles of their parents.
Command—Relies on government officials
to answer the 3 basic economic questions.
Market—Individuals answer the 3 basic
economic questions.
Mixed—Combines elements of all 3.
2.1 Economic Systems
Self Interest—The impulse that encourages
people to fulfill their needs and wants.
Incentives—Something that encourages you
to behave in a particular way.
Authoritarian Socialism(Communism)—
Close to a Pure Command economy I.e.
government commands and controls.
Economic Systems----2.1
Capitalism—Your decisions are not based on
your parents careers, government goals, but
on your own interests and skills.
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Sometimes called Free-Enterprise!
Sometimes called Market economy!
Democratic Socialism—(Mixed economy)—In
between communism and capitalism.
 Countries like: Sweden Poland, France, Angola.
Adam Smith--1776
Adam Smith wrote—”The Wealth of
Nations” in 1776.
Driven by “self-interest”
Concept of the “Invisible Hand”
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Society benefits from
individuals/businesses doing what is best
for themselves.
Invisible Hand
Newspaper Carrier: Why deliver?
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Everyone deserves a newspaper
It is a good newspaper and more people should
read it.
You are paid to deliver the newspaper.
Society benefits??
Ex. 5 Acres of land on Gilbert Road—
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You want to sell it—”self interest”
Benefits??