Warm-Up
Get a textbook and open to page 34. Then,
provide a summary of the THREE ECONOMIC
QUESTIONS?
Chapter 5 Notes:
The Mixed Economy
Pull out a blank sheet of paper…and let’s
begin our next unit.
Three Basic Econ Questions
• What to Produce???
• How to Produce???
• For Whom to Produce???
•Command (Pure Centrally Planned
Economy)
• Government produces everything. All resources are
government owned and production is coordinated by
the central plans of government.
•Pure Capitalistic (Pure Market
Economy)
• Private enterprise produces everything. There is no
government at all.
•Mixed Capitalism (Mixed Economy)
• Combination of government and private enterprise
Student Diary A & B Activity
• Write a maximum 1-2 sentence summary of the
conditions in: (a) Student Diary A and (b) Student
Diary B.
• Pick 3 words to describe each type of economy.
• Which “Student” would you prefer to be? Student
A or B? Why?
How To Produce?
For every economy, the goods are
produced by private enterprise, the
government, or a combination of both.
Government
OR
Private Businesses
Pure Market Economies and Pure
Centrally Planned Economies
• Read on pages 35-38
• Complete the handout by writing a
brief summary of each of the
weaknesses associated with both
economic systems.
Advantages and Disadvantages
• On your paper, create a chart that lists the advantages and
disadvantages of the three different economic systems.
Advantages
COMMAND
“define it”
PURE
“define it”
MIXED
“define it”
Disadvantages
Making a JUMBO Flow Chart
• For both a pure market economy and a pure
centrally planned economy…it comes with
problems.
• After having read them, get into groups of 4 and
create a flow chart that highlights the flaws with
both economic systems.
Your Flow Charts Must:
• Write out each weakness
• Provide a brief summary
• Create an illustration of each weakness
• I might ask groups to share out their answers
…however, each group will be graded based
on what I see on your paper!!!
Problems with
PURE
MARKET
ECONOMY
Problems with
PURE
CENTRALLY
PLANNED
ECONOMY
PME
• Difficult enforcing property
rights
• Some people have few
resources
• Some firms try to
monopolize markets
• No public goods
• Externalities
PCPE
• Consumers get low
priority
• Little choice of freedom
• Central planning can be
inefficient
• Resources owned by the
State are sometimes
wasted
• Environmental damage
PURE CAPITALISM
• PRIVATE ENTERPRISE PRODUCES
EVERYTHING…meaning, INDIVIDUALS make the
economic decisions…looking out for themselves
and their families. Profit is the one and only
motive
• Advantages: People have the freedom to choose,
provides competition so consumers get the best
• Disadvantages: What happens to those that need
help…the young, old, disabled…without the help of
government?
COMMAND
• GOVERNMENT DECIDES HOW, AND
PRODUCES EVERYTHING!!!
• Only a few countries today still have much of a
command economy. (i.e.-North Korea, China)
• Advantages: ability to quickly reroute resources in
case of emergencies [war], nationwide goals can be
set
• Disadvantages: creates no incentive to work hard,
lack of consumer choice, inefficient
Homework: Dear Abby… (2
paragraphs minimum)
Dear Abby,
I am the leader of a new country and our
Parliament is in the middle of a heated
debate on whether to design an economy
that is primarily command-oriented or pure
capitalistic-oriented. What should I advise
our new Parliament members to do? And
Why???
Sincerely,
Confused Leader
Stop, Drop, and Draw
• Draw stick figures to
illustrate the three
different economic
systems.
• What can you draw to
remember the
differences between the
three systems?
MIXED CAPITALISM
• BOTH GOVERNMENT AND PRIVATE
ENTERPRISE
• Most countries today are mixed!!!
(United States, Great Britain, Mexico, France,
Canada, Italy, Japan, etc….and the list goes on and
on)
WHY DO YOU THINK MOST COUNTRIES TODAY
ARE MIXED???? (think about it!!!)
Review:
• Draw a horizontal line in your spiral notebook.
Label the left side of the line, “pure market
economy” and the right side, “pure centrally
planned economy”. Place each of the following
nations on your line at a place that you think
accurately represents the current state of its
economy.
• United States, Mainland China, North Korea, Russia,
Mexico
On the Back…
Writing Prompt:
-Explain why a MIXED ECONOMY is the best way for
countries to operate. Include the advantages that comes
with being a mixed economy, rather, than a command or
pure capitalistic economic system.
-Create a BUTTON that illustrates the advantages of
having a mixed economy.
The U.S. Today
There are 3 levels of our government:
a. Federal (National)
b. State (50 Individual States)
c. Local (thousands and thousands of
cities/counties)
Stop, Drop, and Draw!
• Draw a picture to represent the
three levels of government!!!
What Powers Does Our Gov’t Have?
1. Collect Taxes ($$$)
-money, money, money
2. Provide Services
-Medicare, Welfare, National Defense, etc…
3. Issue Regulations
-laws for you and me to follow for society’s
general welfare
• By taxing, spending and regulating, a government
is able to somewhat alter the answers to the 3
basic questions.
• Production can be based on govt demand:
schools, road
• Government regulations can prevent the
production of some goods and/or services
• By taxing, the govt redistribute these funds to
help the old and the poor
“The Market”
• NOT THE GROCERY STORE!!!
• The term given to describe the exchange made
between buyers and sellers
How Best to be Efficient???
Larger Market (more buyers and sellers)
More Division of Labor
More Opportunities to be Efficient
Question:
•
If individuals are motivated by the ‘invisible
hand’ (profit), describe how the evolution of the
market economy came into being!!!
1.
2.
3.
4.
5.
6.
Division of labor
Specialization
Specialized capital
Efficiency
Allocation of resources
Profit
Evolution of the Market Economy
(don’t write it down…it’s in your course notes)
1.
2.
3.
4.
5.
6.
Division of Labor (people have specific tasks…think
of the assembly line)
Leads to Specialization (really good at one or a few
products)
Wants to become an expert in your good, so you
develop specialized capital (good technology/tools)
Leads to efficiency
Allocate your resources (sell your goods)
Leads to PROFIT!!!