1. an organized way of providing for the wants and needs of people 2. a. use of scarce resources and other economic activity stems from ritual, habit, or custom Advantages: everyone knows which role to play; little uncertainty regarding what to produce or how to produce; for whom to produce is determined by the customs and traditions of the society
Disadvantages: tends to discourage new ideas or ways of doing things; strict roles have the effect of punishing people who act differently or break the rules; lack of progress leads to economic stagnation and a lower standard of living than in other economic systems
2. b. central authority makes the major decisions about what, how, and for whom to produce; can be led by king, dictator, president, or anyone who makes the major economic decisions Advantages: can change direction drastically; many health and public services are available to everyone at little or no cost
Disadvantages: ignores basic wants and needs of consumers; gives people incentive to fill quotas in production rather than producing a good product; requires a large decision-making bureaucracy; planning bureaucracy lacks the flexibility to deal with minor day-to-day problems; rewards for individual initiative are rare
2. c. people make decisions in their own best interest. Advantages: high degree of individual freedom; adjusts to change gradually over time; relatively little government interference; decision-making decentralized; variety of goods and services; high degree of consumer satisfaction
Disadvantages: does not provide for everyone— may be difficult for some people to survive; may not provide enough of some basic goods and services; high degree of uncertainty
2. d. combines elements of the three other types of economic systems Advantages: provides assistance for people otherwise left out; if society has democracy, voters can use electoral power to affect what, how, and for whom decisions
Disadvantages: costs for benefits can be high; availability of services may be limited or the quality may deteriorate over time; may be less efficient than capitalism
I.A.1. choice of own occupations, employers, and uses for money I.A.2. choice of where and how to produce I.B. Fewer goods and services can be produced and fewer wants and needs can be satisfied. I.C. Any two of the following: equal pay for equal work; minimum wage; the fact that false advertising is illegal
I.D.1. adverse economic events such as layoffs and illnesses. I.D.2. disability and retirement benefits for those unable or too old to work; benefits for survivors I.E.1. They earn income by producing goods and services for others. I.E.2. People cannot support themselves or their families, nor can they produce output for others.
I.F.1. a rise in the general level of prices I.F.2. They find that bills are harder to pay and planning for the future is more difficult. I.G. It is necessary to meet the needs of a growing population. I.H. Our goals could change, or new goals could develop.
II.A. restricting individual freedom of choice II.B. fewer people may be hired; restricting employers’ freedom II.C. by comparing estimates of costs to estimates of benefits and then by voting for candidates who back a certain position