Transcript Chapter 2 Economic System and Decision Making

CHAPTER 2
ECONOMIC SYSTEM AND
DECISION MAKING
LESSON 2-1: ECONOMIC SYSTEM
I. Traditional Economies
A. In a traditional economy, roles and economic
decisions are defined by customs.
B. Examples include the Australian Aborigines
and northern Canadian Inuits.
C. The advantages of a traditional economy is
that everyone knows which role to play and
there is little uncertainty about WHAT, HOW,
and FOR WHOM to produce.
II. Command Economies
A. In a command economy, a central authority
determines WHAT, HOW, and FOR WHOM to
produce.
B. Command Economies include North Korea,
Cuba, the former Soviet Union, and the People’s
Republic of China.
C. Advantages –
D. Disadvantages –
III. Market Economies
A. In a market economy, producers and
consumers determine WHAT, HOW, and FOR
WHOM to produce. In each market
transaction, the consumer’s dollar acts like a
“vote” ensuring that producers continue to
bring to market the goods and services that
consumers want to buy.
B. Examples:
C. Advantages –
D. Disadvantages –
LESSON 2-2: EVALUATING ECONOMIC
PERFORMANCE
I. Economic and Social Goals
A. Economic freedom or the freedom for people
to make their own economic decisions, is a goal
highly valued in the U.S.
B. Economic efficiency means that resources
are used wisely and that the benefits gained are
greater than the costs incurred.
C. Economic equity is the social goal that
explains why so many people support laws
against wage and job discrimination.
D. Economic security is a social goal that results
in programs to help support the ill, the elderly,
and workers who have lost their jobs.
E. Most economic systems strive for full
employment, or providing as many jobs as
possible.
F. Economic growth is an important goal because
populations tend to increase and existing
populations tend to want more goods and
services.
II. Trade-offs Among Goals
A. When goals are at odds, people must
compare costs to benefits before resolving the
conflict.
B. Most of the time, people, businesses, and
government are able to work out conflicts
among goals.
C. The flexibility of the American economic
system allows choices and compromises.
III. Freedom of Choice
A. People can buy what they want.
B. Demand will determine _______________.
C. Government sets safety standards.
D. Government regulates _______ in some
industries.
IV. Profit Incentive
A. People produce goods to make a ______.
B. The desire to make money is called
_____________.
C. There is also a risk of _____________.
V. Private Property
A. Private property is held by individuals or
groups rather that the federal, state, or local
gov.
B. Individuals control ___________________.
C. Private property is protected by the
________________.
IV. Competition
A. Different people can produce ___________.
B. Competing businesses try to win customers
with ____________ or __________.
C. Business need to use resources _______ to
stay competitive.
D. In the U.S., most industries allow
__________________.
LESSON 2-3: THE GOALS OF THE NATION
I. Goals of a Free Enterprise
A. To allow individuals to ______________.
B. To use Limited resources wisely.
C. To exhibit fairness---____________.
D. To provide protection for risks we cannot
control.
E. To reach a stable economy.
F. To _____ and ______ the economy.
II. Rights and Responsibilities
A. People have the right to do what they _____
within the law.
B. People have to behave
responsibly in order for the
system to work.
C. People are responsible
for understanding how
government policies affect
the economy and to cast
their votes accordingly.