Economic Systems Three Economic Questions (what, how, who) The Free Market Centrally Planned Economies Mixed Economies

Main goal of any economic system Welfare of people Safety Jobs Healthcare Sound Infrastructure

http://www.infrastructurereportcard.org/

US Infrastructure Spending more than Europe Rank 14 in the world Rank 2 behind Canada (large countries)

The Hyperloop

Chapter 2

Eventually

Three economic questions answered: What (G&S) gets made (produced)? How is it made? Who gets it? Scarcity Who consumes which G & S?

Hyperloop interest Gas prices Affordability of cars urbanization

Is is feasible? We don’t know yet

http://www. detroitnews http://www.detroitnews.com/article/20140223/AUTO0104/302230009/Tesla-s-Elon-Musk-accelerating-vehicle-output-through-2014 http://www.ted.com/talks/elon_musk_the_mind_behind_tesla_spacex_solarcity.html

Other ideas

Who is this guy I never heard of? Elon Musk is a South African-born Canadian-American business magnate, investor and inventor. He is currently the CEO & CTO of SpaceX and CEO & Chief Product Architect of Tesla Motors. He founded SpaceX and PayPal. http://www.teslamotors.com/supercharger http://www.teslamotors.com/batteryswap

4. 5 basic economic goals Efficiency Freedom Security and predictability Equity Growth and innovation

5. 4 main kinds of economies Traditional Market Centrally planned mixed

Reviewing Key Terms Traditional economy Economic system Market economy Factor payments Centrally planned economy Safety net

Chapter 2 Section 2

The Free Market Roles and Functions in a Free Market Economy Who are the players What do they do What other factors affect the free market

The Free Market Economy Individuals and businesses own factors of production make and buy what they want

Households (dual role) own factors of production consumers of G & S

Firms (businesses, companies) make G & S transform “inputs” into “outputs”

Self-interest buyers and sellers consider only their self-interest > thus this becomes the MOTIVATING force in the market

Competition ( the great equalizer) Because producers struggle for consumers’ dollars > competition is the regulating force in the market

Reviewing Key Terms C. Product market E. Incentive I. Consumer sovereignty H. Factor market A. Profit G. Specialization D. Market

Chapter 2 Section 3 Centrally Planned Economies

Central Economic Planning in the Former Soviet Union

1. Main Goal Control economy > build national power and prestige

2. Role of central government A. Control land, labor and capital B. Decide what, how much, and how to produce and distribute G & S

3. Effects on agriculture: a. Positive effect: Government provides equipment, seed, and fertilizer. Workers were guaranteed employment and income b. Negative effect: little or NO incentive to produce

4. Effects on industry Positive: jobs and wages were guaranteed Negative: very little innovation, lack of worker incentive, lower quality resources for consumer goods

5. Effects on consumers Positive: Luxuries were affordable Negative: Few choices, shortages, and poor quality of goods and housing

Reviewing Key Terms socialism…social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society Communism…a political system that by characterized by a centrally planned economy. The central government has all the power

authoritarian…requiring strict obedience to an authority usually a dictator Collective…large farm leased from the state to groups of peasant farmers Heavy industry…industry that requires a large capital investment and that produces items used in other industries

Modern Economies National defense, roads and highway systems Education, healthcare, employment, mass transit Government owns all property and economic output It is moving away from central planning

Hong Kong Allowed to continue with free enterprise system Free enterprise > limited role Pure laissez faire > no role 8. Changing from centrally planned to market based

An industry is privatized when ownership is transferred from Government to Private Individuals > competition No national economy today relies completely on either central planned or the free market