2Economic SystemsWhat would your business have to do conduct business in a foreign country?Take a few minutes to discuss and share
3Economic Systems What is an Economic System? Traditional Command All societies have them.An organized way of providing for the wants and needs of the people.Four kinds:TraditionalCommandMarketMixed
4Traditional-All economic activity stems from ritual, habit, or custom.-Roles are defined by customs of elders and ancestors.-All know their place.Command-Central authority makes the major decisions about what, how, and for whom to produce.-Headed by any leader-Gov’t makes all econ. Decisions – what to make-Cannot own homes, limited freedoms,. .Mixed-When all three types are combined.-Socialism – mixed economic and political system.-Communism – political/economic system where all property is collectively owned.Market-People make decisions in their own best interest.-Great deal of freedom.-Based on capitalism.-Businesses are free to find the best production methods.
6Economic System Advantages Disadvantages Traditional Economy-All know your rolei.e. hunter, gatherer, farmer, etc.-Know who you are producing for-Discourages new ideas/ways of doing things-Economic stagnation – no progress, lower standard of livingCommand Economy-Can change direction drastically-Low cost health and human services – trade off?-Ignore basic wants and needs of consumers-just filling quotas vs. quality product-requires a large decision bureaucracyMarket Economy-Individual freedom-Adjusts to change-Little gov’t interference-Decision making left up to the individual-Variety of goods and services/satisfaction-Does not provide for everyone-May not provide enough of the basic services-High degree of uncertainty among employees.Mixed Economy-Doesn’t leave anyone out-Higher costs, services limited, low quality
7Evaluating Economic Performance Economic and Social GoalsIn your groups, discuss how important it is for you to set goals in your life. Why?
8Evaluating Economic Performance Economic and Social GoalsWe all share broad economic and social goalsAll can be categorized in seven economic and social goals
9Evaluating Economic Performance Goals:Economic FreedomCornerstone of American societyWe place a high value on our freedom to make economic decisionsOccupations, employees, uses for our money
11Evaluating Economic Performance Goals:Economic EfficiencyResources are scarceIf wasted, fewer goods and services can be produced which leads to fewer needs and wants being satisfied
12Evaluating Economic Performance Goals:Economic EquityAs Americans, we believe in fairnessEqual pay for equal work???Minimum Wage – Why do we have it?Illegal advertisingLemon laws
13Evaluating Economic Performance Goals:Economic SecurityProtection from lay-offs or illness, how?Social Security – Discuss how you think it works…Medicare – 65 or older
14Evaluating Economic Performance Goals:Full EmploymentWe all want to workCannot support ourselves/families without
15Evaluating Economic Performance Goals:Price StabilityInflation – more money neededEverything increases, interest rates, goods/servicesDiscourages business activityFixed income
16Evaluating Economic Performance Goals:Economic GrowthWe all have the American dream…better car, house, jobGrowth enables more people to have more goods and servicesPopulation growth makes this a necessity!
17Evaluating Economic Performance Resolving Trade-Offs Among GoalsEconomic system is flexibleAllows for choices, and accommodates compromisesQuestion – What are some other ways that Americans have modified the free enterprise economy?Gov’t provides social goods - Schools, police, fire protectionProducts such as cigarettes and alcohol – age restrictions
18American Free Enterprise The U.S. economy is based on free enterpriseResources are privately owned, and competition is allowed to flourish without much government interferenceCapitalism/free enterpriseCapitalism – private ownership of resourcesFree enterprise – unhindered use of privately owned resources to earn profits
19American Free Enterprise Characteristics of Free Enterprise CapitalismEconomic FreedomIndividual –Can choose occupation, employer, job locationBusinessHire best workersFree to produce products that are most profitable, set pricesFree to risk success or failure
20American Free Enterprise Characteristics of Free Enterprise CapitalismEconomic FreedomConsumer decisionsClassified as:HabitualImpulsiveRationalAs a group, come up with three examples eachThen decide which is the most responsible
21American Free Enterprise Characteristics of Free Enterprise CapitalismVoluntary ExchangeBuyers and sellers freely and willingly engaging in market transactionsBuyer = believes product > money givenSeller = believes money > product given
22American Free Enterprise Characteristics of Free Enterprise CapitalismPrivate Property RightsAbility to own and control their possessions as they wishGives people the incentive to work, save, and invest
23American Free Enterprise Characteristics of Free Enterprise CapitalismProfit MotivePeople are free to risk any part of their wealth in a business ventureWhat is profit/Profit Motive?When you are better off financially at the end of a specific period then you were at the beginningProfit motive is the incentive that encourages people and organizations to improve their material well beingBoth are very important to the well being of a free enterprise system
24American Free Enterprise Characteristics of Free Enterprise CapitalismCompetitionCapitalism thrives on competition, the struggle among sellers to attract competitionFree enterprise capitalism allows competition to flourishBenefits both producers and consumers, How?
25American Free Enterprise The Role of the Entrepreneur, Consumer, and GovernmentIn your groups, describe the roles of the three aforementioned groupsCopy chart into your notesUse your books to complete the chartWrite all information into your notes
26Category Specific Role EntrepreneurConsumerGovernmentProtector –Provider –Regulator –Consumer -
27American Free Enterprise Modified Free EnterpriseSometimes referred to as a mixed economyAllows for some government intervention/regulationNational defenseSystem of laws and justice