Economic Systems
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Transcript Economic Systems
How
do economic
systems answer your
basic economic
questions?
What
to produce
How to Produce
For whom to produce
Answers
the basic
economic questions by
rituals, habits, religious
beliefs, and customs
Individual
roles are
determined the elders
Examples: herding cattle,
hunting and gathering,
subsistence farming
There
is little or no
uncertainty- everyone
knows the role they play
Life is generally stable,
predictable, and
continuous
Tends
to discourage new
ideas and new ways of
doing things
Lack of progress lowers
the standard of living
1.
What to produce?
Whatever customs and
traditions dictate
2.
How to produce?
Whatever customs and
traditions dictate
3.
For whom to produce?
Whatever customs and
traditions dictate
Basic
Economic Questions
are answered by the
government
Only
two Command
Economies left in WorldCuba and North Korea
It
is associated with
communism and
socialism
The
government has total
control over production
and its factors, thus the
economy can change
rapidly. Whatever is
needed most will be
produced
Example
is collective
farms which are owned
and operated by the
central government.
Money made goes to the
government
Free
education, free
healthcare, and
other public services
Economy
is designed to
meet needs not wants
There is no incentive to
work hard—people don’t
often lose their jobs so
they do the bare
minimum
Economy
supports a large
bureaucracy
(government) which
means decision making is
slow, costs of production
are high, and there is no
flexibility
There
is no
reward for
initiative
1.
What to produce?
Whatever the government
says to produce
2.
How to produce?
However the government
tells you to produce
3.
For whom to produce?
For whomever the
government tells you to
produce
Basic
economic
questions are
answered by
consumers
Laissez-faire
is a pure
market economy
meaning “allow to do”.
The government has little
or no power in what is
produced or sold.
Free-enterprise
system- business
owners set their own
prices and sell their
own goods.
Adjusts
to change based
on consumer wants
High level of individual
freedom
Low level of government
interference
Because
individuals make
the decisions, everyone
has a voice in the way
economy runs
Wide
variety of available
goods and services
Many choices=high
degree of consumer
satisfaction
Poverty:
only those with
money can participate
Market
does not provide
for people’s basic needs.
Government must
attempt to do this (Think
about Katrina)
High
degree of
uncertainty: people lose
their jobs and businesses
fail
Greed
based system puts
profits before people
(think about loss of jobs
here. What caused it?)
Are
they truly Free market
economies?
Does the government
regulate businesses?
Does the government
control any businesses?
1.
What to produce?
Directed by the
consumers.
2.
How to produce?
Companies decide
cheapest and most
efficient means of
production.
3 For whom to produce?
The consumer that has the ability and money
to afford the companies product.
An economy is considered a mixed economy
when there are characteristics of more than
one economy evident.
For example, the United States is a mixed
economy because there are privately owned
businesses that operate on their own like a
market system but they are regulated by the
government also.