Chapter 2 Section 1 – pgs Define economic system.

Chapter 2 Section 1 – pgs. 23-27 Define economic system.
List and describe the Three Key Economic Questions. List and describe the four types of economic systems. Using the Chart Below, describe each of the Economic Goals and Societal Values. Then provide a real-life example of each. Economic Goal and Societal Values Summary Example Economic Efficiency Economic Freedom Economic Security and Predictability Economic Equity Economic Growth and Innovation Additional Goals

Economic System Economic System – method used by society to produce goods and services

Four Economic Questions
What and how much should be produced? Who should produce it? How should it be produced? Who should share in its use?

Four Economic Systems Traditional economy – relies on habit, custom, or ritual to decided the 3 economic questions Market economy – economic decisions are made by individuals and are based on exchange, or trade. Command Economies – in a centrally planned economy, the central government alone decides how to answer the three economic questions. Mixed Economies – market-based economic systems in which government plays a limited role.

Economic Goals and Societal Values - pgs. 23-27
Economic Goal and Societal Values Summary Example Economic Efficiency Economic Freedom Economic Security and Predictability Economic Equity Economic Growth and Innovation Additional Goals Manufacturer knowing the best way to use resources wisley (Assembly Line) Making the most of scarce resources Freedom from government intervention in the production and distribution of goods/services Working where you want, spending money the way that you want, owning a business, etc. Knowing that goods and services will be available, payments made on time, government will provide a safety net in times of economic downturns Security – Unemployment Checks, Social Security Predictability – gas at gas pumps, food at store Lawyers earn more than nurses, computer programmers more than truck drivers Fairness, being paid according to your skill level, not being discriminated against Economic growth refers to improving standard of living and GDP. Innovation, improving existing technology. Agricultural age to industrial age to information age. Innovations in computers, communication. Future goal for society. Environmental protection, full employment, universal medical care.

Review Economic Goals Statements Economic Goal
Last week I willingly enrolled in college courses at Coastal. I am so happy that I make my decisions about my future. My uncle lost his job, but thankfully he is able to receive unemployment checks. Wal-Mart recently upgraded all of their registers to touch screen monitors. General Motors replaced all of their human workers with robots in order to increase productivity. As a result of the internet and technology, our economy has experienced significant expansion over the past 30 years. I can always expect Publix to have the food I like! Hopefully in the future we will have full employment. With every degree/skill I earn, I improve my ability to make money. 1. Economic Freedom 2. Economic Security 3. Economic Innovation (Efficiency) 4. Economic Efficiency (Innovation) 5. Economic Growth (Innovation) 6. Economic Predictability 7. Additional (Future) Goals (Equity) 8. Economic Equity (Growth)

Economic Goals and Societal Values Poster Project – pgs. 26-27
Poster Requirements: Title - Economic Goals and Societal Values Summary Statement – “The Economic Goals and Societal Values provide a basic framework for each society and their attempts to provide for their people.” 8 pictures to represent each of the economic and social goals. Label, describe and summarize each picture Economic Efficiency Economic Freedom Economic Security Economic Predictability Economic Equity Economic Growth Economic Innovation Additional Goals Economic Efficiency Description: Using the factors of production in the most productive way possible, as to maximize profit Picture Summary: This picture represents assembly line production at an automobile manufacturing plant. This shows how the division of labor and specialization can increase efficiency.

Economics Goals and Societal Values Poster Project pg. 23 - 27
Economic Goals and Societal Values Summary Statement: The Economic Goals and Societal Values provide a basic framework for each society and their attempts to provide for their people. Economic Predictability Economic Security Economic Efficiency Definition: societies try to maximize the factors of production Picture:This picture represents an efficient use of resources through assembly line production Economic Innovation Economic Growth Additional Goals Economic Freedom Economic Equity Poster Requirements: Title - Economic Goals and Societal Values Summary Statement – Purpose of economic and Societal Values At least 8 pictures to represent each of the Economic Goals and Social Values Label, definition and picture description for each of the 8 Economic Goals and Societal Values

Daily Assignment Chapter 2 Section 1 – pgs. 23-27
Bead Game Simulation

Chapter 2 Section 1 – Daily Assignment Questions pgs. 26 -27
How does a traditional economy answer the three economic questions? Describe traditional economies and their communities. What is a disadvantage to a traditional economy? How are the three economic questions answered in a market economy? What are other names for market economies? How are the three economic questions answered in a command economy? Why are they referred to as command economies? Why are most modern economies referred to as mixed economies?

Chapter 2 Section 2 Imagine that you are walking into Walmart. List 3 items that you could purchase and the departments that you would find them in.

Chapter 2 Section 2 – The Free Market
Market – buyers and sellers meet to exchange goods and services Market Economy – economic decisions(what to produce, how to produce, for whom to produce) are made by consumers and businesses based on exchange of goods and services Capitalism (free market) – Individuals and businesses own the factors of production and can profit on them Voluntary Exchange - is the act of buyers and sellers freely and willingly engaging in market transactions

Specialization Specialization – the separation of tasks within a system; people focus on a specific purpose/task Division of Labor – Workers perform fewer tasks in order to operate more efficiently

Households and Firms Household – Person or group of people living in a residence Consumers - use the goods and services (outputs) to satisfy wants and needs Firm – business, organization that uses resources to produce a product, which it then sells Suppliers – transform “inputs” (F.O.P.) into “outputs” (products)

Product Markets Product Markets – Houses and firms interact; producers sell their goods and services to consumers Households are buyers of goods and services Firms are sellers of goods and services (outputs)

Factor Markets Factor Markets – the markets where productive resources (F.O.P)/Inputs are bought and sold Labor - Firms (businesses) hire workers and pay them salaries Land - Purchased/rented land Capital - Use money from households, purchase capital goods

Factor Market Market for F.O.P Factor Market
Circular Flow Model of Economic Activity – shows the flow of money and goods/services from and to businesses and households Consumer Spending Business Income/Revenue Product Market Product Market Market for Goods and Services Firms sell Households Buy Consumer Goods and Services Final Goods and Services Sold Households Buy and Consume Goods and Services Own and sell the F.O.P Households Firms (Business) Produce and sell Goods and Services Hire and use F.O.P. Firms Land, Labor, Capital - provided by household Inputs for Production (F.O.P.) Factor Market Market for F.O.P Households sell Firms buy Factor Market Income to Households/Individuals Payment for F.O.P. – Rent (Land) Wages (Labor), Interest (Capital), Profit (Entrepreneurs)

Application Questions
In the factor market, what do businesses provide households? The flow of goods and services in the product market is represented by which firm and products on the model below? When you apply for a job at the local Starbucks which market are you in? Which color arrows represent the flow of money; what color arrows represent the flow of inputs and outputs. Income/payment the F.O.P Starbucks/Coffee Factor Blue/Tan

Circular Flow Model of Economic Activity
Consumer Spending/Investing Business Income/Revenue Product Market Goods and Services Purchased: Caramel Frappuccino Goods and Services Sold Households Firms Land, Labor, Capital, Entrepreneurs Inputs for Production (F.O.P.) Factor Market Income to Households/Individuals Payment for F.O.P. – Wages, rent, capital goods

Daily Assignment - Circular Flow Model of Economic Activity
Consumer Spending 1. _________________________ Business Income _________________________ Product Market Goods Purchased 1. ______________________________ 2. _______________________________ Goods Offered 1. ___________________________ 2. ___________________________ Household ________________________ Firm Firm 1. _____________________________ Firm 2. _____________________________ Input for Production 1. ___________________________ Factor of Production Offered 1. ___________________________ Factor Market Weekly Income 1. __________________ Payments for F.O.P 1. _________________

Vince Lombardi “What it Takes To Be Number 1”
"Winning is not a sometime thing; it's an all the time thing. You don't win once in a while; you don't do things right once in a while; you do them right all the time. Winning is a habit. Unfortunately, so is losing. There is no room for second place. There is only one place in my game, and that's first place. I have finished second twice in my time at Green Bay, and I don't ever want to finish second again. There is a second place bowl game, but it is a game for losers played by losers. It is and always has been an American zeal to be first in anything we do, and to win, and to win, and to win. Every time a football player goes to play his trade he's got to play from the ground up-from the soles of his feet right up to his head. Every inch of him has to play. Some guys play with their heads. That's O.K. You've got to be smart to be number one in any business. But more importantly, you've got to play with your heart, with every fiber of your body. If you're lucky enough to find a guy with a lot of head and a lot of heart, he's never going to come off the field second.

Vince Lombardi “What it Takes To Be Number 1”
Running a football team is no different than running any other kind of organization-an army, a political party or a business. The principles are the same. The object is to win-to beat the other guy. Maybe that sounds hard or cruel. I don't think it is. It is a reality of life that men are competitive and the most competitive games draw the most competitive men. That's why they are there-to compete. To know the rules and objectives when they get in the game. The object is to win fairly, squarely, by the rules-but to win. And in truth, I've never known a man worth his salt who in the long run, deep down in his heart, didn't appreciate the grind, the discipline. There is something in good men that really yearns for discipline and the harsh reality of head to head combat. I don't say these things because I believe in the "brute" nature of man or that men must be brutalized to be combative. I believe in God, and I believe in human decency. But I firmly believe that any man's finest hour, the greatest fulfillment of all that he holds dear, is that moment when he has worked his heart out in a good cause and lies exhausted on the field of battle - victorious." ...Vince Lombardi

Competition Article Do you agree with Vincent Lombardi’s assertion that people are born with the desire to compete why or why not? What areas do you see competition in the economy of the United States ? How is competition beneficial to our economy/society? How is it harmful to our economy/society?

Competition Competition – efforts among sellers/producers to attract consumers at various prices At the heart of market economic philosophy Incentive – an expectation that encourages people to behave in a certain way (positive and negative) Businesses respond to profits Consumers respond to price change (high/low)

Chapter 2 Section 2 – Daily Assignment
Economic Profile Adam Smith pgs. 33 What was Adam Smith’s ethnic and professional background? What was the name of the book that he published; when was it published? What did Smith identify in the book? What did he assert about specialization and division of labor? What did he believe about the role of government in the economy? Define the French term Laissez Faire; why did Smith believe in Laissez-Faire economics? What is meant by his metaphor of the Invisible Hand? How do both consumers and businesses benefit from this philosophy?

Chapter 2 Section 3 – Centrally Planned Economies
Command – central authority owns and operates the Factors of Production Centrally Planned Economy – central government answers the three economic questions; WHAT to produce, HOW to produce, and FOR WHOM to produce Oppose private property, free market pricing, economic freedom

Socialism and Communism
Karl Marx – German social philosopher that studied economic systems in Europe Communist Manifesto – written by Marx and Frederick Engels became basis for modern-day command economies Thought capitalism would fail because it put to much wealth in the hands of few and left everyone else poor Believed in a “no-class” system, where all share in wealth/power Socialism – distribution of wealth and F.O.P. equally amongst society Communism – political and economic system with centralized economic decision-making Authoritarian Government – exact strict obedience from their citizens; do not allow individual freedom

Chapter 2 Section 3 – Daily Assignment Questions “The Former Soviet Union” pgs. 36-38
How did the Soviet Union arise? Where did Soviet planners allocate the factors of production? How did the Soviet Union control agriculture? What three industries did Soviet Planners favor? How did the Soviet Union view entrepreneurial endeavors? What was the quote used by Soviet consumers as a joke? Why were Soviet Consumers’ left unsatisfied? Page 39 – Russia in Crisis How did many Russians initially respond to the Communist collapse? What happened over the next decade? How did Russia deal with corruption? What were some characteristics of Russia’s financial problems? What evidence can be seen that success is in sight?

Do Now Ch 2 Section 3 What economic system matches each scenario?
You have two cows. You trade one to your neighbour for a bull. You only produce what you need to survive. Scenario 2 The State takes both and gives you just enough milk to live Scenario 3 You sell one and buy a bull. Your herd multiplies, and your wealth grows. You sell your herd and retire on the income. What economic system matches each scenario? Which scenario do you think is the most ideal and why? Which scenario do you think sounds the most like the United States? Why? What countries do you know of that could fall into scenario 2.

Chapter 2 Section 4 – Modern Economies
Free Enterprise – competition in the marketplace is allowed to flourish with no interference from government Modified Free Enterprise (mixed economy) – businesses are free to compete with some government regulation/intervention Centrally Planned Free Market Mexico France South Africa Poland Japan United Kingdom Hong Kong Canada Singapore United States North Korea Cuba Iran China

Laissez Faire in a Modern Economy
Laissez Faire – no government intervention in the economy Some government intervention is necessary in the economy; some needs are difficult to answer in the marketplace National defense, roads and highways, education, etc… Government acts a protector, regulator and overseer of economy

Government Money Taxes from both households and businesses
Income, state, social security, Medicare/Medicaid, unemployment insurance, etc.

Government in the Factor Market
Government purchases land, labor, and capital from households United States gov’t pays 2.8 million employees $9.7 billion for labor

Government in the Product Market
Government purchases goods and services from firms (businesses) Buildings, office supplies, telephones, computers, etc.

Daily Assignment – Economic Goals
Market Command Tradition Economic Efficiency Yes - High levels of economic freedom No - Many aspects of economic activity are tightly controlled and state-dominated No - Extremely limited, a person’s role in society is based on custom, heritage and tradition Economic Freedom Economic Security Economic Predictability Economic Equity Economic Growth Economic Innovation

Using the Chart Below, identify how each of the economic goals are addressed. Economic Goals Market Economy Command Economy Traditional Economy Economic Freedom Yes - High levels of economic freedom No - Many aspects of economic activity are tightly controlled and state-dominated No - Extremely limited, a person’s role in society is based on custom, heritage and tradition Economic Efficiency Economic Security Economic Predictability Economic Equity Economic Growth Economic Innovation

Using the Chart Below, identify how each of the economic goals are addressed. Economic Goals Market Command Tradition Economic Efficiency Highly stressed because of scarcity and competition Lack of profit motive can lead to a lack of efficiency Slow to adapt to new ideas/technology. Inefficient by standards of modern societies Economic Freedom High levels of economic freedom Many aspects of economic activity are tightly controlled and state-dominated Extremely limited, a person’s role in society is based on custom, heritage and tradition Economic Security Economic Predictability Economic Equity Economic Growth Economic Innovation

Using the Chart Below, identify how each of the economic goals are addressed. Economic Goals Market Command Tradition Economic Efficiency Highly stressed because of scarcity and competition Lack of profit motive can lead to a lack of efficiency Slow to adapt to new ideas/technology. Inefficient by standards of modern societies Economic Freedom High levels of economic freedom Many aspects of economic activity are tightly controlled and state-dominated Extremely limited, a person’s role in society is based on custom, heritage and tradition Economic Security Safeguards In society, but general employment is not assured Economic security is assured based on full employment and government sponsored programs Economic security is assured based on traditional means of production Economic Predictability Economic Equity Economic Growth Economic Innovation

Using the Chart Below, identify how each of the economic goals are addressed. Economic Goals Market Command Tradition Economic Efficiency Highly stressed because of scarcity and competition Lack of profit motive can lead to a lack of efficiency Slow to adapt to new ideas/technology. Inefficient by standards of modern societies Economic Freedom High levels of economic freedom Many aspects of economic activity are tightly controlled and state-dominated Extremely limited, a person’s role in society is based on custom, heritage and tradition Economic Security Safeguards In society, but general employment is not assured Economic security is assured based on full employment and government sponsored programs Economic security is assured based on traditional means of production Economic Predictability High predictability Lack predictability because government controls F.O.P. Predictable in most cases. Can be unpredictable, because F.O.P. are controlled through traditional means Economic Equity Economic Growth Economic Innovation

Using the Chart Below, identify how each of the economic goals are addressed. Economic Goals Market Command Tradition Economic Efficiency Highly stressed because of scarcity and competition Lack of profit motive can lead to a lack of efficiency Slow to adapt to new ideas/technology. Inefficient by standards of modern societies Economic Freedom High levels of economic freedom Many aspects of economic activity are tightly controlled and state-dominated Extremely limited, a person’s role in society is based on custom, heritage and tradition Economic Security Safeguards In society, but general employment is not assured Economic security is assured based on full employment and government sponsored programs Economic security is assured based on traditional means of production Economic Predictability High predictability Lack predictability because government controls F.O.P. Predictable in most cases. Can be unpredictable, because F.O.P. are controlled through traditional means Economic Equity Fairness (hiring and payment) is a primary goal of a market economy Lack of equitable payments based on the production of goods and services Equity is based on customary means of production, women have assigned roles, men have assigned roles Economic Growth Economic Innovation

Using the Chart Below, identify how each of the economic goals are addressed. Economic Goals Market Command Tradition Economic Efficiency Highly stressed because of scarcity and competition Lack of profit motive can lead to a lack of efficiency Slow to adapt to new ideas/technology. Inefficient by standards of modern societies Economic Freedom High levels of economic freedom Many aspects of economic activity are tightly controlled and state-dominated Extremely limited, a person’s role in society is based on custom, heritage and tradition Economic Security Safeguards In society, but general employment is not assured Economic security is assured based on full employment and government sponsored programs Economic security is assured based on traditional means of production Economic Predictability High predictability Lack predictability because government controls F.O.P. Predictable in most cases. Can be unpredictable, because F.O.P. are controlled through traditional means Economic Equity Fairness (hiring and payment) is a primary goal of a market economy Lack of equitable payments based on the production of goods and services Equity is based on customary means of production, women have assigned roles, men have assigned roles Economic Growth Grow at a fast rate due to competition and profit motive Lack of growth because of a lack of efficiency and profit motive Lack of growth due to a lack of productivity and innovation Economic Innovation

Using the Chart Below, identify how each of the economic goals are addressed. Economic Goals Market Command Tradition Economic Efficiency Highly stressed because of scarcity and competition Lack of profit motive can lead to a lack of efficiency Slow to adapt to new ideas/technology. Inefficient by standards of modern societies Economic Freedom High levels of economic freedom Many aspects of economic activity are tightly controlled and state-dominated Extremely limited, a person’s role in society is based on custom, heritage and tradition Economic Security Safeguards In society, but general employment is not assured Economic security is assured based on full employment and government sponsored programs Economic security is assured based on traditional means of production Economic Predictability High predictability Lack predictability because government controls F.O.P. Predictable in most cases. Can be unpredictable, because F.O.P. are controlled through traditional means Economic Equity Fairness (hiring and payment) is a primary goal of a market economy Lack of equitable payments based on the production of goods and services Equity is based on customary means of production, women have assigned roles, men have assigned roles Economic Growth Grow at a fast rate due to competition and profit motive Lack of growth because of a lack of efficiency and profit motive Lack of growth due to a lack of productivity and innovation Economic Innovation Innovation is at a high rate due to changes in the marketplace and competition Less incentive to innovate because profits and credit go to the state Innovation is non-existent by modern standards

Daily Assignment – Comparing Economic Systems
Tradition Command Market 1. 2. 3. 4. 5. 6. 7. 8. 9. Examples Advantages Disadvantages

Junk!!! Chapter 2 – VIS Terms Traditional Economy Command Economy
Market Economy Market Free Market Specialization Division of Labor Household Consumer Firm Supplier Product Market Factor Market Centrally Planned Economy 15. Socialism 16. Communism 17. Authoritarian 18. Laissez-Faire Junk!!!

Due Wednesday 9 - 8 Junk!!! DAQ's pg. 26-27, Ch. 2 Sec. 1
Video Questions - North Korea Comparing Economic Systems, Advantages + Disadvantages Economic Systems + Reflection Questions D.A. Circular Flow Model Circular Flow (Elisa and Marcella) Online Assignment - Scarcity Ch. 2 Sec. 2 D.A. Adam Smith Ch. 2 Sec. 3 D.A. "The Former Soviet Union" Economic Goals and Am. Free Enterprise Flow Chart Chapter 2/3 Study Guide Ch. 2 CW Puzzle Ch. 3 CW Puzzle Ch. 2 Notes Daily Tens (12) Vocab Terms Junk!!!

Circular Flow Model of a Mixed Economy
Consumer Spending/Investing Business Income/Revenue Product Market Goods and Services Sold Goods and Services Purchased: Taxes Taxes Households Expenditures Expenditures Firms Land, Labor, Capital, Entrepreneur Inputs for Production (F.O.P.) Taxes Taxes Factor Market Income to Households/Individuals Payment for F.O.P. – Wages, rent, capital goods

Daily Assignment Group Presentations
Using the Chart Below, identify each groups Economic Goals and Societal Values and the picture they used to represent each goal. Group Number Economic Goal Picture

Study Guide Chapter 2/3 Economic System
What to produce, Who to produce them for, How to produce them Economic: efficiency, freedom, security, predictability, equity, growth, innovation, additional goals Tradition, custom, ritual, habit Central planners dictate the what, how, for whom Households and firms through production and consumption Market Market economy Capitalism Households and Firms Input is something used to produce and output, which is a final good or service Product Factor Adam Smith, Wealth of Nations

Study Guide Chapter 2/3 Be limited in its role in the economy, “Let them do as they please”. Invisible Hand See Circular Flow a) Product when it changed hands from the household to the firm Factor, labor Grills, hostesses, cashiers Factor Karl Marx, Communist Manifesto That it would fail because it put too much money in the hands of the rich and not in the hands of the poor Communism, Socialism Authoritarian Economic Freedom Property Rights Profit Motive Voluntary Exchange Competition

Study Guide Chapter 2/3 Their purchases signal to producers what to produce (consumer sovereignty) Overseer, protector, regulator, informer Technology Public Good Public Private Free Rider Market Failure Externality

Extra Credit Give an example of specialization/division of labor, and explain why it is beneficial. Give an example of a positive and negative externality not mentioned on the test. Explain why the United States is not a true “pure market/free enterprise” system.

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