1. 2016 Types of Economic Systems

2. Scarcity The limited supply of something
There is not a single country in the world that has an abundance of ALL the resources that its people need and want.
Because of this, the countries must make a plan of how to use these limited resources.
This plan is called an Economic System.

3. Factors of Production and Scarcity
Scarcity – shortage of resources
THINK BACK TO THE SCARCITY GAME: WHERE DID YOUR COUNTRY EXPERIENCE SCARCITY?
Economic Resources
Natural Resources – raw materials found in nature that are used to produce goods
Human Resources – people’s knowledge, efforts, and skills used in their work
Capital Resources – used to produce goods and services (buildings, materials, and equipment)
Entrepreneurial Resources - recognize the need for new goods or service

4. Why Economic Systems?
Nations use economic systems to determine how to use their limited resources effectively.
Primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.
Different types of Economic Systems
Traditional Economy
Market Economy/Free Enterprise
Command Economy
Mixed Economy

5. Traditional Economy

6. Traditional Economy: Definition and Key Characteristics
All economic decisions are based on customs, traditions, and beliefs of the past
Religious and cultural values are more important than economics
People will make what they always made and do the same thing as their parents did
Farming, hunting and gathering are done the same way as the generation before
Fear change
Economic activities are centered around the family or ethnic unit
Men and women are given different economic roles and tasks
The exchange of good is done through Bartering: trading without using money

7. Traditional Economy: Examples
Found in rural, under-developed countries–
Vanuatu
Pygmies of Congo
Eskimos & Indian tribes
Belarus
Villages in Africa
Aborigines in Australia
Inuit in Canada
The Amish

8. Traditional Economy: Advantages and Disadvantages
People have specific roles
Security in the way things are done
Little conflict between members of society because there is little competition
Everyone understands how things are done
Disadvantages:
Technology is not used
Difficult to improve
Differentiates the economic roles and status of men and women
Does not allow for growth and development
Changes are slow
There is little social mobility; your role is determined by birth
Individuals often have no control over environmental factors

9. Command Economy

10. Command Economy: Definition and Key Characteristics
The government (or central authority) determines what, how, and for whom goods and services are produced.
ALL economic decisions are made by the government.
The government owns most of the property.
The government sets the prices of goods.
The government determines the wages of workers.
No competition
Heavy taxation

11. Command Economy: Examples
Two types:
Strong Command – where government makes all decisions
Communism – China, Cuba
Requires all productive resources to be owned and operated by the government
Permits little freedom
Moderate Command – where some form of private enterprise exists but the state owns major resources
Socialism – France and Sweden
Maintains medium government control
Government controls key industries like utilities and transportation
Allows private ownership in non-vital industries
Allows competition in smaller, private sector
Permits the right to choose career and place of employment

12. Command Economy: Advantages
Guarantees equal standard of living for everyone
Distributes wealth among all of society
Less crime and poverty
Needs are provided for through the government
Able to act quickly in emergencies
Chooses jobs for everyone
Can ensure stability because it does not coincide with business cycles
Products produced fulfill needs

13. Command Economy: Disadvantages
The system is very harsh to live under, and due to this, there are no PURE Command countries in the world
Often there is insufficient resource distribution: shortages and/or surpluses
Minimal choices
Fewer choices of items
No incentive to produce better product or engage in entrepreneurship
Can often lead to corruption among state planners
Cannot easily adjust to change

14. Market Economy/Free Enterprise

15. Market Economy/Free Enterprise: Definition and Key Characteristics
Also called a Free Market Economy or Free Enterprise Economy
Economic decisions are made based on the changes in prices that occur as buyers and sellers interact in the marketplace
Businesses and consumers decide what they will produce and purchase and in what quantities
Decisions are made according to law of supply & demand
Supply and demand of goods and services determine what is produced and the price that will be charged.
Free Enterprise is competition between companies and shifts the prices of goods and services
The government has no control over the economy.
Private citizens answer all economic questions

16. Market Economy/Free Enterprise: Key Characteristics
In a truly Free Market Economy, the government would not be involved at all.
There would be no laws to make sure goods/services were safe.
There would be no laws to protect workers from unfair bosses.
Because of this, there are no PURE Market Economies

17. Market Economy/Free Enterprise: Advantages and Disadvantages
Competition to have the best products and services
Consumers can buy whatever they like in whatever amounts they want
Adjusts to change easily
Little government intervention
Great variety of goods and services
Disadvantages:
Huge rift between wealthy and poor
Does not always provide basic needs for everyone in society, which can lead people to slip into poverty
May make it difficult for government to provide adequate social services
There are occasionally market failures
People can make choices which are harmful to themselves and to others
Note: a true Market Economy does not exist---SO NO EXAMPLES!

18. Mixed Economy

19. Mixed Economy: Definition and Key Characteristics
Since there are no countries that are purely Command or Market, most are Mixed Economies.
Combination of a Market and a Command Economy
Government takes of people’s needs
Marketplace takes care of people’s wants.

20. Mixed Economy: Examples Most nations have a Mixed Economy: United States, England, Australia
Economic Freedom: individuals have the right to choose
Competition: more than one producer of goods/services insures choice
Private Property: individuals have the right to own their own property including businesses
Self-Interest: individuals make decisions based on what is best for them
Voluntary Exchange: individuals may freely buy and sell goods
Profit Motive: individuals are driven by the desire to profit/make money
Government Regulations: minimum wage, labor hours, etc…
Government limits certain choices: cannot buy or produce certain goods or services like drugs
Government provides aid to the needy: Medicare, Medicaid, welfare

21. Mixed Economy: Advantages and Disadvantages
Balance of needs and wants met by government and in marketplace
Advantages of Common and Market Economies
Can focus on social welfare and political freedom as well as individual liberties
Disadvantages:
Citizens have to pay taxes
Disadvantages of Common and Market Economies
May not lead to optimal use of resources
Government intervention can hinder progress

22. Identifying the Development of Different Countries

23. MDC

24. MDC: More Developed Country Defintion
A developed country, industrialized country, or "more economically developed country" (MEDC), is a sovereign state that has a highly developed economy and advanced technological infrastructure relative to other less industrialized nations.

25. MDC: Key Characteristics
A developed economy refers to a country with a relatively high level of economic growth and security.
Common criteria for evaluating a country's degree of development are:
per capita income or gross domestic product (GDP)
level of industrialization
general standard of living
and the amount of widespread infrastructure.
Noneconomic factors are based upon the Human Development Index (HDI), which quantifies a country's levels of:
education
literacy
health into a single figure.

26. Examples: United States, Great Britain, Canada
MDC: Examples
Examples: United States, Great Britain, Canada
In the Scarcity Game, which countries would be considered MDC and why?

27. NIC

28. NIC: Newly Industrialized Countries Definition
Newly industrialized country (NIC) is a term used by political scientists and economists to describe a country whose level of economic development ranks it somewhere between the developing and first-world classifications.

29. NIC: Key Characteristics and Examples
Countries undergoing rapid economic growth (usually export-oriented).
Recent industrialization
Social upheaval can occur as primarily rural, or agricultural, populations migrate to the cities, where the growth of manufacturing concerns and factories can draw many thousands of laborers.
Examples: South Africa, Mexico, Brazil, India, and China
In the Scarcity Game, which countries would be considered NIC and why?

30. NIC Key Characteristics
NICs usually share some other common features, including:
Strong political leaders
A switch from agricultural to industrial economies, especially in the manufacturing sector
Beginning to have an open-Market Economy , allowing Free Trade with other countries in the world.
Large National Corporation operating in several continents.
Strong capital investment from foreign countries.
Rapid growth of urban centers and population.

31. LDC

32. LDC: Less Developed Countries Definition and Key Characteristics
A lesser-developed country (LDC) is a country that is considered lacking in terms of its economy, infrastructure and industrial base.
Economy is primarily agricultural and little to no industrialization
The population of a lesser-developed country often has a relatively low standard of living, due to low incomes and abundant poverty.
Also referred to as "emerging markets".
Used to be known as Third World Countries
Exhibit the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world

33. LDC Examples
Examples: Angola, Somalia, Sudan, Afghanistan, Bangladesh, Yemen
In the Scarcity Game, which countries would be considered LDCs and why?