Economic Systems and Development Page Essential Skill: Demonstrate understanding of Different Economic systems by giving examples

Quiz coming up… EconomicsFactors of Production Goods & Services Scarcity Three Basic Questions: What?/How? /Who? Creates a need for an economic system And FINALLY… Define 4 types of economic systems, and give an example of each kind.

How does every country in the world deal with SCARCITY? They create an economic system that answers these questions: What goods and services to produce How will these goods and services be produced Who will consume these goods and services?

Traditional Economy: Economy based on tradition and custom Characteristics Follow family’s path (less mobility) Little change over time Disadvantages Not very productive Does not adapt well to new methods and technologies Example: Chad

Market Economy: individuals and businesses own resources & make decisions Characteristics Freedom – to own property and control one’s own labor Competition – among sellers; buyers look for best quality & prices High GDP (Gross Domestic Product); very productive Disadvantages Unsteady Growth – job loss during recessions Profit-Driven – –Focus on profit –Poor working conditions? Products made with child labor? –Negative externalities: Pollution Faulty/dangerous products Example: CA drought & water-guzzling

Command: government owns resources and makes economic decisions Characteristics Resources used for “greater good” Inefficient Low GDP per capita Disadvantages Shortages Poor quality G&S Slow growth rate China transitioning toward Capitalism since 1970s…

Mixed-Market: has elements of both market and command economies Characteristics Individuals, markets and government all influence the economy (U.S. a market-oriented economy) Private ownership of business + government regulation and public services Disadvantages Depends on the “mix” Too much govt. regulation stifles businesses & innovation Too little govt. regulation leads to income disparity, fraud, pollution, poor working conditions

Developed Countries Type: wealthy; high standard of living Characteristics: mixed market economies; high per capita income & GDP; modernized (strong industry & technology) Examples (35ish countries): U.S., Canada, Japan, Germany, U.K. (roughly 35 in world)

Newly Industrialized Countries Type: growing economic powers; industrialized Characteristics: good rate of economic growth; growing export industries Country Examples: China, India, Mexico

Developing Countries Type: minimal economic growth; high number of people living in poverty Characteristics: low income & GDP per capita; low productivity; weak industry; many obstacles Country Examples: most countries in the world; (Examples: Afghanistan, Cuba, Nicaragua, Guatemala, most African nations) Question: Based on the ratio of developing to developed countries, what can be inferred about the standard of living of most people in the world? Most people live at or below the poverty level

Obstacles to Development Be able to explain HOW each problem can hurt an economy. High Population Growth If # ppl increase faster than GDP  fewer jobs available & more poverty Single-Resource Economy Slow econ. growth; Country vulnerable; any problem with the resource can destabilize economy Severe Debt Owe much $ to other nations & can’t keep up; Spending on debt repayment rather than investing in economy Trade Barriers Meant to protect local industries, but often protect inefficient businesses, hurting growth War (What is it good for?) Hurts growth by damaging land, labor AND capital; shortages occur; refugees = loss of labor (“brain drain”) Corruption Leaders steal $ for selves, so less $ to invest in economic growth