Read to Learn
Describe the three basic economic questions
each country must answer to make decisions
about using their resources.
The Main Idea
Scarcity of economic resources forces every
country to develop an economic system that
determines how resources will be used. Each
economic system has its advantages and
disadvantages.
Key Concepts
Basic Economic Questions
Different Types of Economies
Focus on real life, page 17
Which seems the most like the economic
system in the US?
The three economic questions
All economies (or nations) of the world face
the basic economic problem of scarcity of
resources.
Each country must decide how the available
resources will be used to meet the needs
and wants.
*Basic Economic Questions*
What goods and
services should
be
produced?
Deciding to use a
resource for one
purpose means
giving up the
opportunity to use it
for something else.
What is this called?
How should it
be produced?
The methods and
labor used as well
as the quality of
items produced are
important factors.
What needs and
wants will be
satisfied with the
goods and
services
produced?
In most societies,
people can have as
many goods and
services as they can
afford to buy.
1. What to produce?
Nations differ in the type and amount of
resources available. Can you think of any?
Nations differ in their needs. Can you think
of any?
Very difficult – if a country spends too much
in one area, there may not be enough
resources to meet other needs.
2. How to produce?
Nations must decide what combination of
resources will best suit its circumstances.
Ex- we still are a great agricultural (farming)
country but do it much more efficiently now.
How?
Two hundred years ago – 80% pop farmed
Today – 3% pop farms but produce more
goods.
3. What needs and wants to satisfy?
A country must determine which wants and
needs are most critical when deciding what
to produce…because we know a country
can’t produce everything so they must
choose.
Different Types of Economies
Different economic
systems answer the
three basic economic
questions in different
ways.
A country usually
follows one of the
following types of
economies
economic systems
A nation’s plan for
answering the three
economic questions
4 main types of Economic Systems
Command Economy
Market Economy
Traditional Economy
Mixed Economy
You teach the teacher
With your assigned partner:
– Create a PowerPoint presentation with a title
slide
– Topic: You need to teach me about the four
different types of economies and want to use
the PP as a guide.
– Don’t forget! PowerPoint slides aren’t meant to
have tons of text, USE BULLETS!
– Add pictures, word art, and animations to make
the presentation more exciting.
Command Economies
In a command
economy, the
government owns
and controls all the
resources and
businesses.
command economy
The resources are owned
and controlled by the
government.
Command Economies
Characteristics of a Command Economy
The government dictates what will be produced, how it will be
produced, and who will get the goods
There is little choice of what to buy
Goods are not considered necessities
Prices are controlled by the state
There is no competition and little incentive to produce a
better product
Highly skilled workers may earn the same as low-skilled workers
Command Economies
In a moderate command economy, there is
some form of private enterprise, but the state
owns major resources.
Market Economies
A market economy
can also be called a
capitalism.
market economy
The resources are owned
and controlled by the
people of the country
Market Economies
The 3 economic questions are answered by
individuals through buying and selling in the
marketplace
Marketplace – supermarket, Internet, mall,
business office or even a flea market…pretty
much anywhere where money is traded
Market Economies
Competition among similar businesses is one
of the basic characteristics of a free enterprise
system.
Market Economies
Characteristics of a Market Economy
Resources are privately owned
Citizens can own their own homes, land, and businesses
Business owners decide how their businesses will be run
Business owners decide what to produce and sell
Business owners decide what to charge
Government works to promote free trade and prevent unfair
trade practices
Consumers choose their occupations and where to live
There is an uneven distribution of income
Traditional Economies
A traditional
economy is “old
school”
No progression to
new trends.
Less developed
countries use it.
traditional economy
Goods and services are
produced the way it has
always been done.
Mixed Economies
Most nations have a
mixed economy, which
combines elements of
capitalism and socialism
(public ownership) along
with the idea of the
government still having
the final say
mixed economy
Combines elements of the
command and market
economies.
The U.S. Economic System
•U.S. is a Market
Economy
capitalism
•Individual owners are
free to decide what to
produce and buy.
•Individual freedom is
vital to the success of
the U.S economy.
The private ownership of
resources by individuals,
rather than by the
government.
Other names
The US economy is also known as a free
enterprise or private enterprise.
Why do you think it’s called free or private
enterprise?
***The U.S economic system is based on four
important principles:
Private Property
Freedom of Choice
Profit
Competition
(leave some space after each of these, going
to talk about them)
Private PropertyMeans you can own, use, or dispose of
things of value.
In the U.S. you can own anything you want
(as long as it’s legal) and do what you want
with it
Freedom of ChoiceYou can make decisions independently and
must accept the consequences of those
decisions.
Only when individual decisions harm others
will the government regulate freedom of
choice
ProfitIs the money left from sales after all of the
costs of operating a business have been
paid.
Profit is at the heart of the private enterprise
system…people enjoy the challenge of
running their own business and want to do
well and also make a profit.
Competition•Forces businesses to
improve products,
keep costs low,
provide effective
customer service and
search for new ideas.
•If they don’t—who
will????
competition
The rivalry among
businesses to sell their
goods and services
Competition Article
1. In a market system, what determines how
many goods and services an individual can
buy?
It is through one’s income—mostly generated
by working.
2. What type of economy does the US have?
Market economy. Decisions are made in the
market rather than by the government.