1. 12/5 Warm-Ups Pass forward 26.2
1. In which market do firms purchase the factors of production from households?
2. Which market supplies households with goods and services?
Bonus Questions-
Charlotte is competing with several other major cities for a contract with which industry? (hint, they’re in the transportation business)

2. Most missed ?’s Why are all goods and services scarce?
What is total revenue minus total cost?
Who owns factors of production in a market economy?
Can you have a cost if you don’t produce anything? Why?
Why would money flow from firms to households?

3. Four Types of Economies chart on p. 225
Objective: to differentiate between the various types of economies through completion of comparison chart.

4. TYPES OF ECONOMIES
Economic system is a an agreed upon procedure within and among communities to organize the production and distribution of goods and service.

5. Traditional Economy Definition:
Economic system that relies on habit and custom
“That is the way we have always done it”

6. Traditional Economy How are the three economic questions answered?
By tradition
Growth
Not
concerned
with growth
(bartering is used)
Who / What influences the economy?
Tradition

7. Traditional Economy Examples: very isolated tribes Amish
Who loses power in this type of economy?
Political Philosophy and People
n/a
Does not apply to traditional economies

8. Command Economy (Centrally planned)
Definition:
Central government makes all decision on the production and consumption of goods and services.
“We do what we are told”

9. Command Economy Growth Government has complete control
How are the three economic questions answered?
Whatever the govt. decides is needed at the least cost
Growth
Slow growth, inefficient
Who / What influences the economy?
Government has complete control

10. Command Economy Examples: Cuba, North Korea, Iran
Soviet Union

11. Command Economy Who loses power in this type of economy?
Political Philosophy and People
Citizens
Communism
Karl Marx
Socialism

12. Karl Marx p. 226
Marx was born in Germany in 1818 and died in London in He was a philosopher and political economist but was known best as a revolutionary communist. Marx along with Friedrich Engels wrote the Communist Manifesto.

13. Communist Manifesto
History should be described as social classes struggling with one another
19th Century social classes
Proletariat – those that own very little and therefore must sell labor to the capitalists
Bourgeois (capitalists) – the person that owns the factories and buys labor

14. Communist Manifesto (continued)
The conflict between these two classes will eventually lead to revolution by the working class (proletariat). With this revolution there would cease to be a struggle.
“ Workers of all lands, unite” – the final words of the Communist Manifesto
This document lays out the foundations of communism.

15. Since the collapse of the Soviet Union, few countries would describe themselves as having a Marxist government. Political parties throughout the world still maintain Marxist ideologies.
Despite Marx’s predictions, capitalism is still thriving! We still see the existence of a working class and entrepreneurs.

16. Contemporary Communims: Its Status and Future

17. Korean Peninsula From Space

18. Communism for Kiddies?
Smurfs

19. Market Economy
Definition: Economic system in which all economic decisions are made by the citizens
“Make as much as we want”

20. Market Economy Growth Successful and efficient Citizens
How are the three econ. questions answered?
What? – most profitable
How? – least cost method
For Whom? – Highest bidder
Growth
Successful and efficient
Who / What influences the economy?
Citizens
Supply and demand
Competition
Invisible Hand

21. Market Economy
Examples:
United States, Singapore, Hong Kong

22. Market Economy Government Capitalism Adam Smith
Who loses power in this type of economy?
Political Philosophy and People
Government
Capitalism
Adam Smith

23. Mixed Economy
All economies of the world are mixed….. There are no true command or completely free market economies…
Definition: Market based economies in which govt. plays a limited role

24. Mixed Economy Govt. and Citizens Growth varies
How are the three economic questions answered?
Govt. and Citizens
Growth
varies
Who / What influences the economy?
Part citizen / part govt.

25. Mixed Economy Examples:
(technically every country is, to a degree, mixed) including: *United States
*France
*United Kingdom
*Canada

26. Mixed Economy varies John Maynard Keynes
Who loses power in this type of economy?
Political Philosophy and People
varies
John Maynard Keynes

27. Mixed Economies: 229
Objective: to identify the characteristics of a mixed economy through class notes and discussion

28. Mixed Economies Review….. What are the 3 Economic questions?
What goods and services should be produced?
How should these goods and services be produced?
For whom should these goods and services be produced?

29. Mixed Economy COMMAND______________________________MARKET
Communism Capitalism
Socialism Free Market
Centrally Planned/Controlled Free Enterprise
Authoritarian Profit Enterprise
Limited social gain Individual preference of jobs
Government directed Progress is stressed
Factors of production gov’t owned High self-gain
No self-interest or competition Competition
Material rewards
GOV’T CONTROL FREEDOM
North Korea China France US Singapore
Cuba

30. Mixed Economy
Most contemporary economies are a blend of market with some government interference
Remember…..What does laissez-faire mean????

31. Mixed Economy
- There IS a need for certain government interference because some needs and wants of society are difficult to address in the market place (Could the market place provide for national defense or a highway system??)

32. Mixed Economy
- Some needs that markets could meet fall to the government so that ALL members of society can participate (i.e. education)
- Governments create laws to protect property rights and enforce contracts (Why would someone develop a new product if they couldn’t patent the product?)

33. Mixed Economies
- Societies must look at whether their goals could be better addressed by an open market or government action and look at the opportunity cost for each action (Are you willing to pay taxes to fund an army?? Give all people an education??)

34. Mixed Economies Circular Flow Diagram
Remember the circular flow diagram we looked at in Goal 7???
What were the two different markets in this flow?
Who were the two major players in this flow?

35. Market Economy Circular Flow
monetary flow
physical flow
Circular Flow Diagram of a Market Economy
Households
Firms
Households pay firms for goods and services.
Product Market
Firms supply households with goods and services.
Households supply firms with land, labor, and capital
Firms pay households for land, labor, and capital.
Factor Market

36. Mixed Economies Circular Flow Diagram
Adding the government….
-Governments purchase land, labor, and capital from households in the factor market
-Governments purchase goods and services in the product market (buildings, office supplies, phones, computers, etc.)
-Governments provide goods and services by combining resources through the product market (i.e. roads)
-Governments collect taxes from both households and businesses

37. Mixed Economies Circular Flow Diagram
monetary flow
physical flow
Circular Flow Diagram of a Mixed Economy
Households
Firms
taxes
government purchases
Government
expenditures
government-owned factors
taxes

38. Mixed Economies Comparing Mixed Economies
Free enterprise: economic system characterized by private or corporate ownership of capital goods; investments are determined by private decision rather than state control
Transition: a period of change in
which an economy moves away
from central planning toward
a market-based system
China

39. Mixed Economies
Privatized: to make a transition, state firms must sell their businesses to individuals and then allow them to compete with one another in the marketplace
THE US HAS A FREE ENTERPRISE SYSTEM!!
-Government interferes to provide services, keep order, and promote the general welfare
-US law protects private property

40. Test Corrections and Homework
Write the question and the complete answer (not just the letter) or rewrite the question and answer in a complete sentence.
P. 231 reading guide 21.1 and 21.2

41. Origami Foldable Use the distributed handout as your guide
You will need 4 colored pieces of paper
You will need 3 white pieces of paper
TOP
Fold like this – 3 times per square……
Left top
Rt top
Left bottom
Rt bottom
Bottom