1. Characteristics of Command, Market, Traditional, & Mixed Economies (8.01) J. Worley Civics

2. Basic Economic Questions What to produce? How to produce it? How much to produce? For whom to produce it?

3. Traditional Economies What is produced is whatever has been produced in the past Produce usually just what they need to survive Laborers have little opportunity for economic advancement Not as common today since they tend to grow unstable

4. Command Economy Gov’t determines what is produced, how it is produced, and how much it will cost Employees may or may not have any control of the job they hold Incentive to produce is only a sense of duty Slow to react to changes in demands

5. Free Market Economy Producers and consumers determine what gets made and for whom Prices are geared to what consumers are willing to pay

6. Mixed Market Economy Gives freedom to producers and consumers Gov’t involvement is just enough to try to avoid economic catastrophes

7. Free Enterprise and its Encouragement of Private Ownership (8.02)

8. Free Enterprise System Market economy that requires households and firms to be allowed to have private property Goals of Free Enterprise Security- Protection from Negative change Equity- Ownership of a firm or part of a firm Freedom- Capability to do what you need to Full Employment- Unemployment rate equals the natural rate of unemployment

9. Free Enterprise System (cont.) Private Property Land, labor, capital, etc. owned by private citizens/businesses rather than states Voluntary Exchange The right to trade for what is desired Productivity & Efficiency Since producers are motivated by profit, they are motivated to produce more which makes them seek better means of efficient production

10. Free Enterprise System (cont.) Patents Guaranteed ownership and control of an invention, innovation, or production technique for a specified amount of time Copyrights Legal right granted to a writer, musician, artist, etc. to exclusive publication, production, sale or distribution of a literary, musical, dramatic, or artistic work

11. Free Enterprise System (cont.) Specialization and Division of Labor Increase productivity by splitting up work into smaller, more specialized (specific) and parts

12. Circular Flow Diagram and How Interaction Determines Pricing (8.03)

13. Circular Flow Model

14. Economic Activity & Exchange Wages and/or Salaries Money received in exchange for labor provided to a certain firm or individual Economic Interdependence The mutual need for households, businesses, and government to depend on each other in order for the economy to function smoothly

15. Markets Factor Market This is where producers invest Goods sold to producers so that they can improve or increase production Product Market This is where producers make a profit Goods which are sold for final consumption to consumers