Objectives:
1. Identify the three key economic questions of what to produce, how to produce, and who
consumes what is produced.
2. Analyze the societal values that determine how a country answers the three economic
questions.
3. Explain the characteristics of traditional, command, and market economies and describe the
societal values that influence them.
------------------------------------------------------------------------------------------------------------------------------ Scarcity is that we cannot have all that we ___________or _________.
 In some places in the world, _____________________________________________________
for food, clothing, and shelter.
 Scarcity forces societies and nations to answer some hard _____________________
 Different economic systems have evolved in response to the ____________________________.
 ________________________ – the method used by a society to produce and distribute goods and
services.
 Which economic system a society employs depends on that society’s ________ and _________.
Three KEY Economic Questions:
-Because economic resources are limited every society must answer three key economic
questions.
1.
2.
3.
1. What goods and services should be produced?
> Individuals in every society must decide ___________________________________ in order to
_________________ society’s needs and wants.
> In today’s society – nations have to decide how much of their ________________________ to
____________ to national defense, education, public health, welfare, or consumer goods.
> Because of our ________________________, each production decision that a society must
make comes at an opportunity cost.
2. How should these goods and services be produced?
> Next question is how to use our _____________ to produce goods and ____________.
> Do we produce electricity with _______, solar power, or ________________________.
> Should we produce food on ___________________________________________ or on
small family farms?
> Before the introduction of modern farming equipment - - it took 56 worker-hours to
farm one acre of land (produced 15 bushels of wheat)…In today’s mechanical world - it takes it takes 2.9 worker-hours to farm one acre of land (produce 40 bushels of wheat)
3. Who consumers these goods and services?
> By the 1990s, the top manufacturers in the US were launching 13 _______________ each day –
filling the store shelves even more that they were.
> Stores on average carry _________ different items compared to 3,000 items some 50 years ago.
> How do we _________________________________ these goods that are produced each year?
+ Who gets to drive a luxury car {Ferrari 430} and who can only afford a bus pass.
+ Who attends a rap concert and who stays home?
+ Who gets access to a good education and who has to start working after high school?
> The answer to the questions of distribution is determined by how societies choose to
______________________________.
> ____________________________ – the income people receive for supplying factors of
production – Land, Labor, Capital, or Entrepreneurship.
> How much should we pay the owners of the factors of production? How do we decide how
much a particular piece of land is worth? How much do people in professions make?
Who gets to consume which goods and services lies at the ___________________ of the _____________
between economic systems today?
Economic Goals and Societal Values:
- Different societies answer the three economic questions based on the importance they
attach to various economic goals.
1. _____________________________
Most societies try to maximize their ______________ they have to work with. Making
the most of the resources.
2. _____________________________
Freedom from ______________________________ in the production and distribution of
goods and services.
We value the opportunity to make our own choices in things like the job we want,
the products/services we buy and etc.
3. _____________________________________________________________
We want an __________________ that the goods and services will be available,
payments will be made on time, and a _____________ will protect individuals in times of
_______________________________________.
i.e. Unemployment Insurance; Disability Insurance; Social Security; and others
4. _____________________________________
Society must decide the best way to divide its __________________.
What constitutes a ___________________?
Should everyone _____________, or should one’s consumption depend on how much
one produces?
How much should society provide for those who are _________ or unwilling to produce?
Doctors earn more than garbage collectors
Professional athletes earn more than secretaries
5. ____________________________________________
A nation’s economy must grow for a nation to improve its ________________________
Standard of Living is the level of economic prosperity.
If a country is growing, the economy has to grow in order to provide _____________ and
__________________ for people.
6. __________________________________
A society may value goals in addition to those we have talked about in the previous
slides.
Environmental protection, full employment, universal medical care, and other goals that
may come to be in the future.
Economies and Values:
 Four different _______________________ have developed to address the three key economic
questions.
 Each system reflects a different ________________________________________
 It also ______________________________ of the societies in which these systems are present.
____________________________________________
 They rely on ________, ____________, and ____________ to decide what to produce, how to
produce it, and to whom to distribute it.
 There is little room for (no_____________________ or _______________.
 The traditional economic system revolves around _______________________.
 Work tends to be divided along gender lines.
 Kids take up the occupation of their parents.
 i.e If your family fish for a living, you will fish when you grow up.
 These communities tend to stay relatively ____________ and _______________.
 They work to support the entire group instead of themselves.
 _________________ and _______________________ are the basics.
_____________________________________
 Economic decisions are made by ___________________ and are based on exchange or trade.
 The choices made by individuals determine what gets made and how, as well as who consumes
the ________________ and _________________________.
 These economies are also called _____________________________
____________________________________________
 In a centrally planned economy – the ___________________________ alone decides how to
answer the three questions.
 This is called __________________________________.
___________________________
 Most modern economies are __________________.
 They are a market-based economic system in which the government plays a limited role.
REVIEW:
1. What is an economic system?
2. How do a traditional economy, a market economy, a command economy, and a mixed
economy differ?
3.Why aren’t all people paid the same amount in factor payments for the resources they
provide?
4. Why do governments provide safety nets for their citizens?
5. Give at least example of a traditional, a command, and a market economic system.