Types of Economies

Basic Decisions To Be Made How much freedom should the citizens have to make decisions on their own? How much freedom should the citizens have to make decisions on their own? Citizens and leaders have to decide what goods will be produced or services will be provided Citizens and leaders have to decide what goods will be produced or services will be provided

Difficult question of how the goods are to distributed Difficult question of how the goods are to distributed

Economic System: organized set of procedures and practices that a society follows in the production and distribution of goods and services Economic System: organized set of procedures and practices that a society follows in the production and distribution of goods and services

4 Types of Economic Systems Traditional Economy: relies on customs Traditional Economy: relies on customs Customs, religion, and laws aid in the passing of skills from parent to child Customs, religion, and laws aid in the passing of skills from parent to child Change happens slowly because people are reluctant to move from how things were done in the past Change happens slowly because people are reluctant to move from how things were done in the past

Some of these systems still exist in Africa, Latin America, and the Middle East Some of these systems still exist in Africa, Latin America, and the Middle East

Command Economies: rely on powerful government officials, often named central planners, to make economic decisions Command Economies: rely on powerful government officials, often named central planners, to make economic decisions

Decide on how goods will be produced and how much of each will end up in the hands of the citizens Decide on how goods will be produced and how much of each will end up in the hands of the citizens Individual citizen usually has to defer to the leaders on most economic matters Individual citizen usually has to defer to the leaders on most economic matters

Ancient Egypt, the pharaoh controlled all aspects of production and distribution Ancient Egypt, the pharaoh controlled all aspects of production and distribution Owned all of the land and collected all of the taxes Owned all of the land and collected all of the taxes European Middle Ages- lords of the manor exercised similar power European Middle Ages- lords of the manor exercised similar power

Pure Market Economy: relies on the individual to make the economic decisions Pure Market Economy: relies on the individual to make the economic decisions Government has little say in what is produced, sold, or consumed Government has little say in what is produced, sold, or consumed System relies on the “market” to provide enough resources to keep things going System relies on the “market” to provide enough resources to keep things going

A market is where goods and services are exchanged freely. A market is where goods and services are exchanged freely. People are motivated by self- interest People are motivated by self- interest

Mixed Economies: economies of today are classified this way, because they combine aspects of the pure market and command systems Mixed Economies: economies of today are classified this way, because they combine aspects of the pure market and command systems

Capitalist: United States Capitalist: United States Individuals own and control the resources, but the government does have some control of the economy through taxation and regulations Individuals own and control the resources, but the government does have some control of the economy through taxation and regulations

Nations that are closer to the command style economy are known as authoritarian socialist or communist Nations that are closer to the command style economy are known as authoritarian socialist or communist Government controls all of the resources and makes all economic decisions Government controls all of the resources and makes all economic decisions

Cuba is an example of a communist country- individuals are starting to make more economic decisions for themselves Cuba is an example of a communist country- individuals are starting to make more economic decisions for themselves

Evaluate the economic system of the United States. List and explain a few of its strengths and weaknesses. Evaluate the economic system of the United States. List and explain a few of its strengths and weaknesses.

Strengths: Strengths: Diversity of people Diversity of people Large amounts of capital Large amounts of capital Freedom of movement and speech Freedom of movement and speech

Weaknesses: Weaknesses: Trade deficit Trade deficit Lack of savings Lack of savings Distribution of wealth Distribution of wealth

Who Gets What and Why? United States has less than 5% of the world’s population United States has less than 5% of the world’s population We consume over 1/3 of the world’s food. We consume over 1/3 of the world’s food. How is that possible? How is that possible? Is there a lot of waste involved? Is there a lot of waste involved?

How did we gain such prominence? How did we gain such prominence? How do we maintain such control? How do we maintain such control?

Microeconomics: decisions made by individuals and businesses Microeconomics: decisions made by individuals and businesses Macroeconomics: economics on a national or global scale- you would study this if you wanted to know how our national govt uses its resources Macroeconomics: economics on a national or global scale- you would study this if you wanted to know how our national govt uses its resources

Learning how to make a small business run more efficiently would be by studying microeconomics Learning how to make a small business run more efficiently would be by studying microeconomics If you are going to major in business, you will have to take both macro and micro If you are going to major in business, you will have to take both macro and micro

How can the United States control so much of the world’s resources? Why do we have it so good? How can the United States control so much of the world’s resources? Why do we have it so good?

We have a good standard of living because we produce so much surplus wealth We have a good standard of living because we produce so much surplus wealth We are the world’s primary economic power because for the last two centuries, we have had a legacy of economic freedom that allowed capital to be used by entrepreneurs in order to innovate and excel We are the world’s primary economic power because for the last two centuries, we have had a legacy of economic freedom that allowed capital to be used by entrepreneurs in order to innovate and excel

Quiz Friday over the last two PowerPoints Quiz Friday over the last two PowerPoints Current event due Friday Current event due Friday Extra credit for a current event that is about any of the material from this week of notes Extra credit for a current event that is about any of the material from this week of notes