Chapter 2 Notes
Economic Systems
Economic System
• The method used by a
society to produce and
distribute goods and
services
What goods and Services should be
produced?
• Each decision a society
makes comes with
opportunity costs
• We have to decide,
besides basic needs,
what to devote to
national defense,
education, public health
and welfare, or
consumer goods.
How should goods and services be
produced?
• How should we produce
energy? Should
teachers have classes of
20 or 50? Should we
produce food on large
corporate farms or
small family farms?
• Check out the chart• the top is before
modern equipment
Who consumes goods and services?
• Factor Paymentsincome given to people
who supply the factors
of production- land,
labor, capital or
entrepreneurship
• How are goods
distributed?
• Who gets an expensive
car and who rides the
bus?
• It is decided by how
societies choose to
distribute income
Capitalism
• Based on Adam Smith’s
idea
• Supply and demand
• Free enterprise
• Originally Laissez Faireleave businesses alone
• Some government
regulation (air and
water pollution)
Market Economy
• Economic decisions are
made by individuals and
are based on exchange
or trade
• Also called free
markets, or capitalism
Communism
• Ruled by a dictator
• One party- Communist
• The government tells
workers what to
produce
• Leads to shortages
• Everyone is equal- in
being oppressed (unless
you're in the
government
Command Economy
• Centrally planned
economy- the central
government alone
decides how to answer
all 3 economic
questions
• A central authority is in
“command” of the
economy
• ( Communism)
Socialism
• Karl Marx’s idea that all
workers were equal and
they were the ones that
would run the factories
and fields
• Land to be redistributed by wealthy
landowners so
everyone would have
land
• Leads to Communism
because this does not
work with so many
people involved
Mixed Economy
• Most modern
economies are mixed- a
combination of
traditional, market and
centrally planned
economies
Economic Security
• We want to know that
every time we go to the
store, we can get what
we need or get gas etc.
• Safety Net- government
programs to help out
when things get
financially rough
• Standard of living- level
of economic prosperity
• These will differ among
communities and areas
of the nation and the
world.
• Sometimes price of
good increases and your
paycheck doesn’t
Economic Equality
• What’s fair?
• Many people believe in
equal pay for equal
work (women)
• Lawyers still make more
than nurses who work
longer hours and do
harder work
Banking
•
•
•
•
•
•
•
What to Know:
Direct deposit
Bank cards
Credit cards
Overdraft protection
Automatic transfers
Online banking
•
•
•
•
How to apply:
Money to deposit
Identification
Social Security Number
(SSN)
• Signature
• (job to make money to
deposit) ;)
Fees (of course