Chapter 2 Sections I, 2, and 3

I. Traditional Economies A. Defined by custom B. African Mbuti, Australian Aborigines, and Canada’s Inuits C. Little uncertainty D. Discouragement of new ideas – Lower standards of living

II. Command Economies A. Central authority B. North Korea, Cuba, China, former USSR C. Advantages – Ability to change direction – Little uncertainty D. Disadvantages – Consumer needs may not be met – Hard work is not rewarded

III. Market Economies A. Producers and consumers answer questions B. U.S., Canada, Japan, South Korea, Singapore C. Advantages – Adjust to change – Freedom – Variety D. Disadvantages – Inability to meet all needs – Prospect of economic failure

I. Economic and Social Goals A. Economic freedom B. Economic efficiency C. Equity D. Security E. Full Employment F. Price Stability G. Economic Growth

II. Trade-Offs Among Goals A. Comparing cost B. Conflicts among goals C. Flexibility

I. Competition and Free Enterprise A. Private citizens own factors – Limited government interference B. Economic Freedom C. Voluntary Exchange D. Private Property Rights E. Profit Motive F. Competition – Lowers prices

II. The Role of the Entrepreneur A. Use land, capital, and labor B. Successful entrepreneurs benefit all C. New products, more competition, more production, higher quality and lower prices.

III. The Role of the Consumer A. Consumer sovereignty B. Dollars as “votes”

IV. The Role of Government A. Protector – Prevent abuse B. Provide and Consume – Education and welfare C. Regulator – Preserve competition D. National Goals – Economic equity and security