Economic Systems
UNIT 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


High level of state participation and
spending


EX: Possess the means of production,
participate in managerial decisions, make
decisions about labor and output
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