Document 11683253

What goods and
services will be
› What do we have?
How will they be
› Hand > machine >
Who gets the stuff?
› Who reaps the
Economic system (economy) – an
organized way of providing for the wants
and needs of people.
1). Command
2). Market
3). Traditional
Economic activity is planned out by the
government, with people having little
› Cuba
› North Korea
› Former Soviet Union
Allows an economy to change direction
very quickly.
› After Stalin’s first two Five-Year Plans, Russia
moved from a rural agricultural economy to
an industrial economy.
Little uncertainty as to who will do what.
No unemployment because the
government gives everyone a job
(whether it is needed or not).
› Ayn Rand - Anthem
Not designed to meet the wants of
› Stalin’s Five Year Plan directed resources
away from both agriculture and consumer
Provides strange incentives
› Do just enough to meet quotas.
No rewards for individual performance.
› Tetris
No flexibility to handle problems.
› Great Depression disrupted the USSR’s First
Five-Year Plan
Requires a large decision making
› Stalin’s Five-Year Plans governed all
economic activity in Russia…that’s a lot of
People and businesses act in their own
best interests to answer the three basic
economic questions.
Lure of personal and
financial gain leads
consumers and
businesses to interact
in various markets.
Each person acts as
they see fit in order
to advance their
own interests.
“It is not from the
benevolence of the
butcher, the brewer,
or the baker that we
expect our dinner,
but from their regard
to their own interest.”
– Wealth of Nations,
Economy can adjust to change over time
› Businesses can adapt to changing consumer
tastes by creating new/different products.
High degree of individual freedom
› Businesses and individuals are free to do what
they want.
Small degree of government
interference (Mixed Economy)
Economic decisions are made by all, not
limited to government officials.
Seemingly unlimited variety of goods
and services available to consumers.
Does not provide for the basic needs of
› Elderly, disabled and other groups would be
unable to survive in a market economy without
governmental assistance.
Does not provide
certain services that
people value.
› National Defense &
High degree of
› Tommy Boy
› Jobs going overseas
› Market Failures
Economic activity is
based on tradition
with roles
determined by
› Medieval Europe
› Various hunting tribes
in Africa and northern
 Everyone
knows what
their role is.
 Life
is generally
and stable.
Discourages new ideas and new ways of
doing things.
Lack of progress leads to a lower standard of
Mixed Economy
› Market and command
› Government meets some public needs
 National defense, education, infrastructure,
programs to help needy
Based on 4 important principles
Private Property
Freedom of choice
Economic Freedom
Economic Equity
Economic Security
Price Stability
Individuals have freedom to choose their
own occupations, employers, and
spending habits.
Businesses have freedom to choose how
and where to produce goods/services.
Are we meeting this goal?
People should receive equal pay for equal work.
People should receive adequate pay for the work
they perform.
People should all have the same opportunities to
get ahead.
Are we meeting this goal?
We should have protection from
negative economic events such as
layoffs and injuries.
› Social Security – federal program that
provides disability and retirement benefits.
Everyone should have their basic needs
Are we meeting this goal?
…People get mad!!!!!!!
As you listen, think
about the goals of:
Economic Equity?
Economic Security?