HW RB, p.14/VI 1 economic 3 economy 5 economical 7 economy 9 economical 11 economical 13 Economics 16 economic 18 economic 20 economics 22 economise 24 economical 26 economists 2 economic 4 economic 6 economic 8 economics 10 economy 12 economy 15 economy 17 economist 19 economic - economy 21 economic 23 economic 25 economics 27 economise TYPES OF ECONOMIC SYSTEMS Economic system: An organized way in which a state or nation allocates its resources and apportions goods and services in the national community. To allocate To apportion Resources = To share out according to a plan = Anything that is used to produce goods and services SOME BASIC PREMISES… Resources are limited/ scarce. Human wants exceed resources. The economy decides how to allocate scarce resources by answering some basic questions. ECONOMIC QUESTIONS→TYPE OF ECONOMY What to produce? How to produce? For whom to produce? MARKET ECONOMY PLANNED ECONOMY MIXED ECONOMY Reading: RB, p. 30 • Read the first two sections and fill in the first two columns in exercise II (p. 31). Market / capitalist /free-market economies Role of gov.: Limited (e.g., passes laws, provides essential goods & services, ensures fair competition) • Ownership of resources: By private individuals. Allocation of resources: By the market mechanism (forces of supply & demand) • Competition:Yes. Advantages: Competition →lower costs, wider choice of goods and services, better quality Disadvantages: Firms may sacrifice public interest for profit, lower costs and private interests, market imperfections unequal distribution of wealth Planned / command economies Role of gov.: Vital: owns resources, distributes goods and services, plans, organizes and co-ordinates production • Ownership of resources: By the state Allocation of resources: By the state • Competition: No. Advantages: more equal distribution of income and wealth, production for need, not profit Disadvantages: No competition standardised goods of little variety and low quality, consumer choice is limited, low motivation to work standard of living is lower Read “Mixed economies” Complete the table in exercise II. Mixed economies: the public sector Role of gov.: Supplies some public goods and services free at point of use (paid for by taxes.) • Ownership of resources: By the state Allocation of resources: By the state • Competition: No. Advantages: The state provides a minimum standard of living for everyone (welfare state); Disadvantages: Not mentioned in the text. Mixed economies: the private sector Role of gov.: Ensures fair competition. Some regulation of private sector businesses through laws. Private sector businesses also benefit from public goods and services. • Ownership of resources: By individuals and businesses. Allocation of resources: Market system (market mechanism) • Competition:Yes. Advantages: Not mentioned in the text. Disadvantages: Not mentioned in the text. Look at the images and decide: Which characteristics of market and planned economies do the images illustrate? Why? Explain your answers using your notes. Unequal distribution of income: Homelessness Lower quality of products and standard of living Unequal distribution of income: Large poor-rich gap A trailer A recreational vehicle (RV) Little variety and choice for consumers Sacrificing public interest in exchange for lower costs: Outsourcing Unmotivated workers, standardisation Sacrificing public interest in exchange for lower costs: Sweatshops VERBS NOUNS Allocate Allocation Plan Plan Organise Organisation Co-ordinate Co-ordination Distribute Distribution Supply Supply Command Command Compete Competition Produce Production