World Economic Systems

What’s the Big Idea? In our last unit, you explored patterns of settlement, land use, and the living conditions of countries around the world. Each of these societies has a type of economic system that produces, uses, and distributes goods and services. These systems vary depending on many factors, including resources, industries, traditions, government policies, and trade relationships.

Key Terms Economy Entrepreneurial Traditional economy Command economy Market economy Mixed economy Supply and demand Production Goods and services Consumer Market Distribution Imports Exports Land Capital Primary industry Secondary industry Tertiary industry

Different World Economies Have you ever seen the glow of Toronto’s downtown at night? These buildings are home to some of the biggest banks in Canada. Every day, decisions and transactions are made in these buildings that affect the economy and the lives of most Canadians. Money constantly moves between banks, industries, and people. Throughout the world, you will find different economic systems. Many people live outside the world of banks, investments, and paycheques. Their decisions are based on traditions, barter, or government control of production and distribution. So how do economic systems influence industries across Canada and the world?

Operating Your Own Business What activities do you enjoy? What skills do you have? Your answers to these questions could launch you into a business of your own. If you can come up with a plan that makes sense, you could become an entrepreneur.

The Five Economic Questions Some businesses produce goods (cars or beauty products) while others provide services (car repairs or hairstyling). There are five basic economic questions that every business person needs to consider.

1. Who Produces Goods and Services? Artists, farmers, dentists, and electricians all provide different types of services. The quality of the service reflects the abilities of the people who provide them. Even people with talent must get an education to better prepare them for the work they will do.

2. What Goods and Services Are Produced? Geography often determines which goods can be provided and what services are needed. Florida farmers produce oranges because winter temperatures are warm enough. Companies along the Ottawa River offer whitewater rafting because of long stretches of rapids.

3. How Are Goods and Services Produced? Most cars are mass-produced using the assembly-line technique. This cuts production costs and makes the vehicle cheaper to buy. Ferraris are hand-built using small-scale production team methods. Productions costs are higher, but so is the quality of the finished car.

4. For Whom Are Goods and Services Produced? Businesses must carefully study the wants and needs of potential customers before they make new products or offer services. Dog walkers, for example, might customize their services according to the needs of the pets and desires of the pet owners. They might offer related services such as grooming.

5. How Are Goods and Services Distributed? Large companies such as Tim Hortons use truck fleets to carry products to their stores and outlets. The trailers act as rolling advertisements. Tim Hortons moves products to its stores across Canada from distribution centers in Ontario, Alberta, Nova Scotia, and British Columbia.

Four Economic Resources The answers to the five economic questions are keys to the success of a business. They are also important to the countries or regions in which these activities are carried out. Within each country or region, there are also four economic resources that are vital to its economic system.

In economic terms, the word land means more than property In economic terms, the word land means more than property. It means the resources of the earth – the raw materials of industry and business. It includes soil, water, forests, animals, minerals and energy resources. Some places, like Canada, have an abundance of resources.

People are very important in the production of goods and services when their skills are combined with other economic resources. Skilled labour is needed in today’s work force. Without it, business must rely on outside sources to assist them.

In economics, the word “capital” means what investment money can buy In economics, the word “capital” means what investment money can buy. Therefore, capital is referring to money but also to capital goods like transportation equipment. You can either use your own money or raise money by allowing others to invest in your company. Some businesses need large amounts of money which may require foreign investment. The problem with this is profits may leave the country and not benefit the local economy.

An entrepreneur is like the captain of a hockey team who must help unify his team in order to win. If entrepreneurial abilities are weak, the business will fail. He or she must be able to recognize opportunities and be able to combine land, labour, and capital to make a profit. If the entrepreneur is successful, the whole region can benefit.

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