 In the Middle Ages, beer was consumed more than water because it was safer to drink alcohol than to drink polluted water  In Mexico, artists can pay their taxes with artwork  Mobile phones have 18 times more bacteria than toilet handles

Unit I: Economics Basics and Market Types Lesson VI

 Do you agree or disagree with these statements??? A. The government should be able to tell farmers which crops to grow. B. Laws should regulate which chemicals can be added to foods. C. Foods should be given to people who cannot afford to buy food.

 Each economy must answer three basic questions  What should be produced?  How should it be produced?  Who should get the goods and services?  The way that these questions are answered describe their economic system  Their answer and their economic system show us how important each one of the main economic goals is to them

 Economic Growth:  A nation’s economy must grow as its population grows and find new jobs for the new people  When income increases, the standard of living should increase Innovation is the process of bringing new methods, products, or ideas into use

 Economic Efficiency:  Resources are scarce and societies should get the most of them  An economy should waste very little by correctly deciding what to produce  Economic Freedom:  Citizens should have the freedom to buy what they want, work where they want to, and own property  Citizens are able to start their own business at any time

 Economic Security:  Citizens should feel secure in their ability to get their needs and wants every day and if they come upon hard times  A “safety net” should be put in place by governments to help those in need  Economic Equity:  Not all societies will define equity the same way  How the “economic pie” is divided will show how a society views equity

 Do you think the US meets the 5 Economic Goals?  If so, how you see them playing out?  If not, how do you think the US can get there?

 Around the globe, there are four basic types of economies that exist  They are:  Traditional economy  Command economy  Market economy  Mixed economy

 Things are done the way they always have been and follow long-established patterns  Habit, custom, pattern  Example: Australian Aborigines  Live in huts in nature  Create things to use as barter  Split jobs to produce enough to live off of

 Certain economic roles for all members of the community  Stable, predictable, and continuous life  Revolves around family  Communities stay relatively close and small

 Discourages new ideas, new technology, and new ways of doing things  Lower standard of living – lack modern conveniences  Have few mechanisms in place to deal with disasters such as floods, drought

 A central planning authority (government) controls the economy and makes all decisions  AKA Centrally Planned or Communist  Example: USSR (Soviet Russia)  The government set levels of wages and prices  Controlled the allocation of resources  Decided what would be produced and how much  Government Ministry Gosplan designed plans to achieve objectives based on 5 year plans

 Central authority is in command of the economy  Capable of dramatic change in a short time  Little uncertainty over choice of career, where to work, or losing job  Many basic education, public health, and other public services available at little or no cost

 Does not meet wants and needs of consumers  Lacks effective incentives to get people to work  Requires large bureaucracy, which consumes resources  New and different ideas discouraged, no room for individuality  Poor-quality goods, shortages, and diminishing production

 Interactions between individuals and companies in the marketplace determine how goods are distributed  The economy is run by supply and demand  Buyers and sellers’ dollars vote for products  Goods and services are consumed by those who are willing and able to pay the market price  Also known as a free market system, capitalism, or laissez-faire

 Large gaps in the distribution of wealth  No minimum wage laws  Lack of safety in the workplace  No regulations on food and drugs  No workers compensation, social security, welfare, etc.

 Individual freedom for everyone  Little to no government interference  Not concentrated in the hands of a few  Variety of goods and services  High degree of consumer satisfaction

 Rewards only productive resources  Does not provide for people that can’t work  No guarantee for a job  Does not always provide public goods such as:  Defense, universal education, or health care

 A mixed economic system is one that combines the elements of a command economy and a market economy  Most of the world’s economies today are mixed economies that exist on a continuum between market and command

 Market-oriented economy: An economy where the basic framework resembles that of a market economy, but the government plays a role in a few sectors of the economies  Command-oriented economy: An economy where the basic framework resembles that of a command economy, but some private enterprise is allowed into the economy

 Need government intervention to provide national defense, roads and highway systems, conservation, environmental protection, education, and more  Key is to balance control and freedom

 Less efficient than the private sector  Excess costs can discourage enterprise  A lot of resources are given to social welfare programs  May not have enough resources left to make profits

 Some government control is good as it protects the public by putting standards in place  Regulation of food and drug safety  Minimum wage laws in place  Programs like Social Security and welfare exist

 Developing Economy: the economy of a non- industrialized poor country that is seeking to develop its resources by industrialization