Presentation on theme: "SS6E5 The student will analyze different economic systems."— Presentation transcript:
1 SS6E5 The student will analyze different economic systems. SS6E6 The student will analyze the benefits of and barriers to voluntary trade in Europe.SS6E7 The student will describe the factors that cause economic growth and examine their presence or absence in Europe.ECONOMICS IN EUROPE
2 ELEMENTSCompare how traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce.Explain how most countries have a mixed economy located on a continuum between pure market and pure command.Compare and contrast the economic systems found in the United Kingdom, Germany and RussiaExplain how specialization encourages trade between countries.Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargos.Explain why international trade requires a system for exchanging currencies between nations.Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP).Explain the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP).Describe the role of natural resources in a country’s economyDescribe the role of entrepreneurship
3 ESSENTIAL QUESTIONSHow do the three types of economic systems (traditional, command, and market economies) answer the questions of what, how, and for whom to produce?How do most countries strike a balance between having a pure market and pure command economy?What are the similarities and differences between the economic systems in the United Kingdom, Germany and Russia?How does specialization encourage trade between countries?How do trade barriers (tariffs, quotas, and embargoes) hinder voluntary trade from occurring between countries?Why is it necessary to exchange currencies for nations to trade?How does the European Union encourage voluntary trade among its members?What is the relationship between capital, human capital investment, and Gross Domestic Product (GDP)?How does the unequal distribution of resources affect European countries?What is an entrepreneur?
4 What is an Economic System? Every society, whether a country, state, city, town, has an economic systemAn economic system is how a society organizes the production, consumption and distribution of goods and services
5 Systems of Economy There are three main types of economic systems TraditionalFound mostly in societies that are based on farmingPeople produce enough goods to surviveEither by farming, gathering or huntingMake their own clothes and toolsAnything extra is usually tradedCommandGovernment controls what is produced, how things are producedGovernment has all the resources and dictates what is to be made and who gets the productDecisions made on wealth, class status or by position in a waiting lineMarketBased on what the consumers of the country want to buy and sellSupply and demand determines what is produced and how it is producedPeople may own their own businessesWho gets a product determines how much they can afford to buy it
6 Countries with Different Systems NORTH KOREAPAKISTANUNITED STATES OF AMERICA
7 The Idea of Mixed Economy Most countries in the world have a mixed economyMost are in between command and market economiesBecause of growing populations, citizens acquiring more rights, the addition of resources and government changes, countries have moved towards mixed economiesExamples of countries with mixed economiesUnited StatesEnglandFranceSouth Africa
9 Economic System of the United Kingdom The U.K. has a mixed market economy and it is the second largest economy in the European Union. The U.K. has most of its GDP come from banking, insurance and businesses under private ownership. The government still controls medicine and welfare, but the human capital of the U.K. is very high, thanks to skilled workers in technology, education and entrepreneurship.
10 Economic System of Germany Germany has a type of mixed economy called a social market economy. The government controls some things, but industry mainly brings in money to Germany. They have a social welfare system for the poor, and their human capital is very high, as education is stressed greatly. Germany has the strongest economy in Europe today.
11 Economic System of Russia Russia has a mixed market economy, and it is not a strong one. Since Communism ended, the government has given up businesses to private owners, and a lot of the country’s businesses are not functioning due to lack of funds. Russia gets money from selling oil. Their human capital is low due to lack of proper education in schools and colleges.
12 SpecializationThe act of concentrating on a limited number of goods and activities to tradeHelps people and companies use resources more efficientlyAllows for increased production and consumption of goods and services
13 Types of Trade Barriers TariffsTaxes on imported goodsMakes consumers pay a higher price for the itemIncrease in demandQuotasRestrictions on the amount of a good that can be imported into a countryCause shortages that raise pricesEmbargosForbids or disallows trade with other countries
14 Currency Exchange in Europe Currency is the type of money used to exchange or purchase goodsThe system of exchanging money internationally is called foreign exchangeMost countries in Europe use euros, which allows for easy exchange of goods in almost all countries in Europe
15 Capital and Human Capital vs. GDP The knowledge and skills that allow for people to make goods and services for societyFactorsTraining and educationCapitalThings that are used to make other goodsFactories, technology and machinesGross Domestic Product (GDP)The total market value of the goods and services produced by a country’s economy during a specific period of timeUsed by economists to determine how healthy or unhealthy a country is
16 Human Capital, Capital and GDP The relationship between human capital and GDP is if a country has good source of human capital, the GDP tends to be higherThe relationship between capital and GDP is the more capital in a country, the healthier the country is in the long term
17 Natural Resources in Europe Natural resources that drive Europe’s economy includeOilCoalNatural GasIronForestryRivers
18 EntrepreneurshipAn entrepreneur is someone who has an idea for a good or service and takes risks to produce the good or serviceEntrepreneurs know of the risks before the product is producedEntrepreneurs help the economy to grow based on borrowing funds, use capital and human capital and natural resourcesEurope as a whole does not have a lot of entrepreneurship compared to other continents