Economy
Week of 10/5/2015
Journal Prompt
• Examine your clothes and make a like of
“Made In______” (country it was made in).
• Answer the following questions:
– How do you benefit from being able to buy
clothes made in other countries?
– Would you be in favor of a policy that will raise the
price of tennis shoes but reduce the amount
available? Why or why not.
Standard
• SS6E5 The student will describe different
economic systems (traditional, command,
market, mixed) and how they answer the basic
economic questions (What to produce? For
whom to produce?).
Learning Targets
• I can explain traditional, command, and
market economies.
• I can explain how traditional, command, and
market economies decide what do produce,
how to produce it, and for whom to produce.
Create a statement…
• Below are the terms will will cover in this unit.
Define each term . Make and educated guess.
• Economy
• Command market
• Mixed market
• Trade
• produce
Economic Systems
Because of the problem of scarcity (a limited
supply of something) every country needs a
system to determine how to use its resources.
Countries develop economic systems to
determine how to use the limited resources to
answer the three economic questions.
Three Questions
We classify economic systems according
to how they answer these 3 questions.
What to produce?
How to produce?
For whom to produce?
Tariffs
• Taxes placed on imported goods
• Make imported products cost more
• Increases the demand for a lower-priced item
produced domestically
•
Example: America may charge a tariff on imported cheese to make it more expensive. This
would make Americans buy the cheaper, American-made cheese. In the end, by enforcing a
tariff, America helps support its farmers and makes more money
Quotas
• Put a legal limit on how much of a product can
be imported
• Can cause shortages
• Causes prices to rise
•
Example: America may put a quota on how many BMW automobiles can be imported form
Germany. This would make the price of BMW cars rise. It would also encourage Americans
to buy cheaper, American-made cars. America benefits by selling more locally made cars and
Germany benefits by selling more expensive BMWs.
Embargoes
• When trade is not allowed between two
countries
• No goods can be sold or bought between two
countries
• Like putting the countries in “Time Out”
•
Example: America as a trade embargo with Cuba. America cannot buy or sell anything from
Cuba and Cuba cannot buy or sell anything from America. It is illegal to buy Cuban cigars in
America, for example, because they are an import from Cuba
Traditional Economy
“That’s The Way We’ve Always Done It ”
Traditional Economy
• Who decides what to produce?
– People follow their customs and make what their
ancestors made.
• Who decides how to produce goods &
services?
– People grow & make things the same way that their
ancestors did.
• Who are the goods & services
• produced for?
– People in the village who need them.
Command Economy
“We Do What We’re Told”
Command Economy
• Who decides what to produce?
– Government makes all economic decisions
• Who decides how to produce goods and
services?
– Gov’t decides how to make goods/services
• Who are the goods and services
produced for?
– Whomever the government decides to give them to
Market Economy
“Make As Much As We Want and Do It Any
Way We Want ”
Market Economy
• Who decides what to produce?
– Businesses base decisions, like price, on supply and
demand and free enterprise
• Who decides how to produce goods and
services?
– Businesses decide how to produce goods
• Who are the goods and services
produced for?
– consumers
Mixed Economy
 No system in the world is 100% command,
market, or traditional. It is a mixture of two
systems.
 Mixed economy - economic system that
incorporates elements of different systems
(usually command and market)
 UK, Germany, and Russia are mixed:
 Market - malls, restaurants, entrepreneurship
 Command - minimum wage, labor laws
 Most countries have this system
Economic Continuum
•
A group of financial experts set up a rating
system to help us understand how much
command and market each country has in it.
•
This Index of Economic Freedom gives each
country a number that can be plotted on a
economic continuum.
Economic Systems
Pure
Command
Pure
Market
United Kingdom
79%
Germany
Russia
71%
51%
Pure
Command
Pure
Market
Canada
81%
Cuba
28%
Pure
Command
Brazil
57%
Pure
Market
Australia
83%
Pure
Command
Pure
Market
Economic Terms of Importance IRA
• Choose from the following ways to explain 10
economic terms:
• A) pictoword- draw a picture and include the
definition of the word
• B) acrostic poem - write an acrostic poem about
the term (include a definition in the poem)
• C) charades- create a symbol/gesture (without
words/number) which explains the meaning of
the term
Summary Question
What are the three types of economic systems?
Traditional
Command
Market
Summary
Question
Most countries are _____________
economies, because
___________________________.
Most countries are mixed economies, because
they have characteristics of 2 or more
economic systems. They most often fall
between command and market.