Types of Economies
Warm-Up
1. Scarcity means that we have ________________ wants and
____________ resources
2. Which factor of production would natural material like cotton
fall under?
a. Land
b. Labor c. Capital
d. Entrepreneurship
3. Which type of business is owned by only one person?
4. How does a corporation make its money?
5. If I owned the local Wal-Mart in Roanoke Rapids, what am I
the owner of?
– a. Sole proprietorship
b. Partnership
– c. Corporation
d. Franchise
6. Who discovered that using the Division of Labor could make
production more efficient?
– a. Adam Smith
b. Karl Marx
– c. John Locke
d. Montesquieu
Agree or Disagree?
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
The government should own all businesses.
The government should regulate business.
Business should be owned by private individuals.
You should do the same job your parents did.
Technology should be used to increase
production.
You should be paid based on your level of skills.
You should be paid based on your contribution to
production.
All workers should be paid equally.
The government should never tell business what
to do.
The government should decide what businesses
should make.
Businesses should produce according to what the
consumers want.
The government should decide what the best way
to produce goods and services is.
Businesses should compete to find the best way
to produce the most goods and services.
Agree
Disagree
The answers to the 3 Economic
Questions: _______, _________,
and _____________ to produce
are different for each type of
economy.
How people satisfy their wants also
determines each type of economy.
• Traditional Economy: things are done
“the way they have always been done.”
– Ex: you farm the same way your greatgreat grandfather farmed.
– Little new technology.
– This is typical in developing countries
and communities
– Jobs determined based on custom.
• Custom & Habit determines the answers
to the three basic economic questions.
HOW IS AMERICA
LIKE A TRADITIONAL
ECONOMY?
HOW IS AMERICA NOT
LIKE A TRADITIONAL
ECONOMY?
COMMAND ECONOMY
• All businesses are owned & operated by the government
for the benefit of all citizens.
– People are paid equally even though they do
different jobs.
– Gov’t decides what to produce and sets the price of
goods / services
• Nicknames: Communism, Marxism, planned economy
• Examples: Cuba, North Korea
• Government answers the three economic questions
HOW IS AMERICA
LIKE A COMMAND
ECONOMY?
HOW IS AMERICA NOT
LIKE A COMMAND
ECONOMY?
MARKET ECONOMY
Production and exchange is regulated by competition between
•
•
•
individuals and businesses (firms).
1. People have the right to own private property
2. Individuals and firms make decisions based on what is in their best
interest.
– Businesses produce goods for profits = Profit Motive
3. Everyone’s needs will be met b/c producers will make the most
profit by making what consumers want.
-- Producers supply what is demanded by consumers
Nicknames: Laissez-Faire “hands off,” Capitalism, Free Enterprise
System, Invisible Hand
Examples: England, Germany, Japan
Competition answers the 3 economic questions (what, how, whom)
– The government DOES NOT tell people what to produce or buy.
HOW IS AMERICA
LIKE A MARKET
ECONOMY?
HOW IS AMERICA NOT
LIKE A MARKET
ECONOMY?
4. MIXED ECONOMY
Combination of a market and command economy.
- Market and gov’t answer the 3 economic questions
- Gov’t regulates business to protect the environment and
workers.
Ex: In a meat packing plant, the gov’t regulates working
conditions and the level of sanitation.
AMERICA is a mixed economy because we have some gov’t
regulation (minimum wage, no monopolies, pollution limits,
etc) on firms, but the government does not control everything.
Economic Scenarios
• 3 Scenarios
• All must complete ALL scenarios.
Australian Aboriginees,
Cuba
America
• Smile Packet Combo  Worth $10.00
• Must have the staple taken out
• Must say “EGAN” in Red on the non-lined side
• Must have a Stick figure family on the LINED side
– Dad in Green
– Mom in blue
– Child in black
• Smile Packet Super  Worth $5.00
• Must be folded one more time
• Must be stapled one more time
• After folding and stapling, on one side, draw another smiley face in
green marker
• On the other side, draw a stick figure family, all in red.
• Smile Packet Regular  Worth $2.00
• No folds, but one additional staple anywhere on the packet
• Original smiley face must be outlined in black
• Draw another Smiley Face on the back using the same black marker