Economic Systems, Decision Making, and Performance,

Economic Systems Economic System – an organized way of providing for the wants and needs of their people. Traditional Economies Traditional Economies are where allocation of resources and economic activity comes from ritual, habit or custom; everyone knows that role to play; do what the family does; strict rules and lack of progress Command Economies have central authority that determines economic decisions; people have little to no authority; can make changes quickly; public services are available to everyone at little to no cost (if they have them); What about quality? Command Economies are not based on consumers; doesn’t give people incentive to work hard; similar wages; work just hard enough to get by; huge bureaucracy; lacks flexibility and adjustment; can’t get ahead

Market Economy Market Economies depend on people and business to determine WHAT, HOW, and FOR WHOM; There is a market for buyers and sellers to come together They adjust to change; individual freedom to choose what to produce and sell; individuals choose what to buy; little government interference (exceptions are national security and environmental protection); decentralized decision making; many good and services; consumer satisfaction Does not provide basic needs of everyone; does not provide enough services that people need (justice system, education, national defense, healthcare); uncertainty (Will I lose my job?); fail if they aren’t competitive; needs freedom of workers and producers; consumers need information to make good choices; monopolies

America’s Social and Economic Goals Economic Freedom – We choose our own jobs, employers and uses for money. We choose what we produce. Economic Efficiency – Don’t waste resources; Fewer goods and services can be produced; more benefits than costs Economic Equity – Equal work, equal pay; discrimination is illegal; no false advertising Economic Security – Insurance plans for unexpected illness or injury; Social Security helps those with disabilities and retirement benefits; unemployment benefits Full Employment – provide as many jobs as possible so there will be more goods and services and people can provide for their families

Price Stability – stable prices; Who would be hurt by inflation? Inflation discourages business; interests increase Economic Growth – produce more goods and services which will equal higher standard of living; necessary for population growth

What is important to us? Endangered species? Cleaner Environment? More goods and services for people? TINSTAAFL There are trade-offs, and sometimes goals conflict -free trade vs. protective tariffs - Raise minimum wage? U.S. has ability to compromise.