1. Free enterprise & other economic systems
Topic 2
Free enterprise & other economic systems

2. 3 basic economic questions
How do societies meet people’s wants & needs?
(Resources are scare everywhere)

3. 3 basic economic questions
What goods & services should be produced?
2. How should goods & services be produced?
3. Who consumes the goods & services that are produced?

4. 3 basic economic questions
What goods & services should be produced?
2. How should goods & services be produced?
3. Who consumes the goods & services that are produced?

5. sahara 1

6. 2

7. 3
Zimbabwe

8. 4
Ecuador community garden

9. 3 basic economic questions
What to produce: Defense? Education? Consumer goods? How: Public or private schools? Oil or solar power? Who consumes: Who goes to college? Who gets to buy food? Who depends on how society distributes income. How much to doctors make? Teachers? Mail carriers?

10. How?

11. Economic Goals of a society
Efficiency Freedom Security Equity Growth
In your notes, describe what you think each of these means

12. Economic Goals of society
Efficiency: Resources are scarce so societies try to maximize what they can produce
Freedom: People value the opportunity to make their own choices
Security: People don’t like uncertainty, so societies try to reassure people that g&s will be available when needed
Safety nets
Equity: Fairness (Should every one get the same? Should consumption depend on production? Provide for those who are unwilling to produce?)
Growth: A nation’s economy must grow with its population
Improve standard of living

16. There are 4 different Economic Systems
The structure of methods & principles a society uses to produce & distribute goods & services.
There are 4 different Economic Systems
Depending on how a society answers the 3 basic questions (depending on how much they value the 5 different economic goals)

22. Read the article on the Types of Economic Systems
Read the article on the Types of Economic Systems. Write down 5 things you learned from the article. 5 full sentences

23. Markets
Market: Any arrangement that allows buyers & sellers to exchange things Participants in a free market: Households & Firms
Consumers of g&s
Produce g&s

24. Circular flow model
Products
Resources

25. Adam smith
Scottish social philosopher 1776 published The Wealth of Nations Competition & self-interest drive free markets

26. incentives
Hope of reward or fear of penalty Encourages a person to behave in a certain way

27. The invisible hand
People act in self-interest Consumers buy what they want, Producers make what will make $ Competition causes firms to produce more & regulates price Market place operates efficiently with no central planning

28. Command economies
Operate in direct contrast to free market enterprises. Socialism: a range of economic & political systems based on the belief that wealth should be evenly distributed throughout society Communism: Central government owns & controls all resources & makes all economic decisions

29. Karl marx
German philosopher Unlike Adam Smith, stressed the tensions between labor & capital Labor was source of value, but under capitalism, factory owners earned the profit Capitalism was exploitation of workers

30. Mixed economies Every system is flawed
Market system with some government involvement
Every system is flawed
Traditional: little potential for growth of change
Command: Stifle innovation, don’t meet consumers needs, limit freedom
Free Market: People don’t always get things right
Laissez-faire: Government generally should not intervene in the market place

31. Reasons for mixed economy
Governments may limit child labor to protect children’s health and safety.

32. Circular flow model of a mixed economy

34. Singapore is one of the world’s freest markets today

35. United states
Foundation of our economy is a free market United States Free Enterprise System US government provides vital services, promotes general welfare, & keeps order. Too much or too little government involvement?

36. While almost all countries have mixed economic systems, some lean farther toward planned economies and others lean more toward free markets. Analyze Information How would you describe the location of the United States on this continuum?

37. Topic 2.5 Benefits of free enterprise
Opportunity Incentives Competition Private property rights
Pg. 44

39. 2.6 Economic growth
Tracking the Economy
Yesterday you bought a pack of gum or a new bike or your first car. Your purchase was just one of millions of exchanges that took place across the country that day. Government economists track these patterns of buying and selling in order to assess the state of the American economy.

40. Macroeconomics: study of economic behavior & decision-making in a nation’s whole economy Microeconomics: study of economic behavior & decision-making in small units (ex. Households & firms)

41. gdp
Expansion, country produces more than it did before, GDP increases
Contraction, country produces less, GDP goes down
Gross domestic product Total value of g&s purchased in a country in a given year
Expansion & contraction is called business cycle

43. 2.7 public goods
Public goods: shared good or service for which it would be inefficient or impractical to make consumers pay individually, & to exclude those who did not pay