What’s an economic system? The way to solve the basic problem of scarcity

Bell Work P. 204 Create a chart to answer the following question “How do the different positions of Canada and the U.S. reflect different values?”

Publicly owned / Planned Economy Definition: in economics, the part of the economy owned and controlled by government and paid for by taxes Government makes decisions on how to use resources Plans what will be produced and decides how to use limited resources

Advantages Public / Planned Economy Prices are kept under control and thus everybody can afford to consume goods and services. There is less inequality of wealth. There is no duplication as the distribution of resources is centrally planned. Low level of unemployment as the government aims to provide employment to everybody. Elimination of waste resulting from competition between firms.

Disadvantages Public / Planned economy Consumers cannot choose and only those goods and services are produced which are decided by the government. Lack of profit motive may lead to companies being inefficient. Lot of time and money is wasted in communicating instructions from the government to the organizations.

Mixed Economy Some resources are publicly owned and some are privately owned Individuals and government make decisions about what to produce The level of government involvement changes depending what political party is in power

Advantages of Mixed Economy The mixed economy is helpful in increasing national production in the country. Both public and private sectors work hard to bring about more production. The problems created by too much public control are solved through mixed economy. It provides freedom of enterprise ownership and profit earning as well as social welfare and political freedom. all the national recourses are utilized under mixed economy.

Disadvantages of Mixed Economy Mixed economy is half way house. It is not helpful in achieving optimal use of national resources. The mixed economy suffers from the drawbacks of both the capitalism and socialism. Mixed economy seldom achieved progress. It suffers from continuous backwardness. Under mixed economy wastage of different types of resources occurs in the economy.

Privately Owned / Market Economy In economics, the part of the economy owned and controlled by businesses and individuals Individuals solve problem of scarcity Private businesses sell their products to consumers, who make their own decisions about what to buy Businesses succeed if they produce what consumers want, otherwise they fail Government does not get involved

Advantages of Private / Market Economy The market gives producers motivation to produce goods that consumers want. The market provides an incentive to acquire useful skills. The price system encourages producers and consumers to conserve scarce resources. Competition pushes businesses to be efficient: keeping costs down and production high. The market system involves a high degree of economic freedom. Advantages of Private / Market Economy

Disadvantages of Private / Market Economy A private market economy may be quite unstable (unemployment, inflation, growth) Business may simply satisfy the wants they have created through advertising. Prices may give false or inadequate signals to producers and consumers (externalities, like pollution). Markets just do not work in some areas (public goods, such as national defense). Monopolistic industries may restrict output and drive up prices. Market economies tend to produce a skewed distribution of income (large gap between the rich and the poor).