Economic Systems

advertisement
 How
do economic
systems answer your
basic economic
questions?
 What
to produce
 How to Produce
 For whom to produce
 Answers
the basic
economic questions by
rituals, habits, religious
beliefs, and customs
 Individual
roles are
determined the elders
 Examples: herding cattle,
hunting and gathering,
subsistence farming
 There
is little or no
uncertainty- everyone
knows the role they play
 Life is generally stable,
predictable, and
continuous
 Tends
to discourage new
ideas and new ways of
doing things
 Lack of progress lowers
the standard of living
 1.
What to produce?
 Whatever customs and
traditions dictate
 2.
How to produce?
 Whatever customs and
traditions dictate
 3.
For whom to produce?
 Whatever customs and
traditions dictate
 Basic
Economic Questions
are answered by the
government
 Only
two Command
Economies left in WorldCuba and North Korea
 It
is associated with
communism and
socialism
 The
government has total
control over production
and its factors, thus the
economy can change
rapidly. Whatever is
needed most will be
produced
 Example
is collective
farms which are owned
and operated by the
central government.
Money made goes to the
government
Free
education, free
healthcare, and
other public services
 Economy
is designed to
meet needs not wants
 There is no incentive to
work hard—people don’t
often lose their jobs so
they do the bare
minimum
 Economy
supports a large
bureaucracy
(government) which
means decision making is
slow, costs of production
are high, and there is no
flexibility
There
is no
reward for
initiative
 1.
What to produce?
 Whatever the government
says to produce
 2.
How to produce?
 However the government
tells you to produce
 3.
For whom to produce?
 For whomever the
government tells you to
produce
Basic
economic
questions are
answered by
consumers
 Laissez-faire
is a pure
market economy
meaning “allow to do”.
The government has little
or no power in what is
produced or sold.
Free-enterprise
system- business
owners set their own
prices and sell their
own goods.
 Adjusts
to change based
on consumer wants
 High level of individual
freedom
 Low level of government
interference
 Because
individuals make
the decisions, everyone
has a voice in the way
economy runs
 Wide
variety of available
goods and services
 Many choices=high
degree of consumer
satisfaction
 Poverty:
only those with
money can participate
 Market
does not provide
for people’s basic needs.
Government must
attempt to do this (Think
about Katrina)
 High
degree of
uncertainty: people lose
their jobs and businesses
fail
 Greed
based system puts
profits before people
(think about loss of jobs
here. What caused it?)
 Are
they truly Free market
economies?
 Does the government
regulate businesses?
 Does the government
control any businesses?
 1.
What to produce?
Directed by the
consumers.
 2.
How to produce?
Companies decide
cheapest and most
efficient means of
production.
3 For whom to produce?
The consumer that has the ability and money
to afford the companies product.



An economy is considered a mixed economy
when there are characteristics of more than
one economy evident.
For example, the United States is a mixed
economy because there are privately owned
businesses that operate on their own like a
market system but they are regulated by the
government also.
Download