1. Types of Economies
TRADITIONAL: allocation of resources & econ activity stems from ritual, habit, or custom (know role, little progress)
COMMAND: central authority makes most of the econ decisions, ppl expected to go along
MARKET: ppl & firms act in their own best interests; buyers & sellers can come together in order to exchange goods and services

2. SSEF4 Compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce.
a. Compare traditional, command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation.
b. Analyze how each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, price stability, full employment, and sustainability.
c. Compare and contrast strategies for allocating scarce resources, such as by price, majority rule, contests, force, sharing, lottery, authority, first- come-first-served, and personal characteristics.

3. COMMAND ECONOMY A=advantages D=Disadvantages
A: Public services are available
A: Relative security (job, pension, educ)
A: less fluctuation re spending & producing
D: Not designed to meet the wants of consumers
D: Limited competition reduced incentives  higher production costs (poorer quality)
D: Needs large decision-making bureaucracy
D: Ppl w/ new/unique ideas find it difficult to get ahead

4. MARKET ECONOMY A: Adjust to change over time A: Individual freedom
A: Relatively small gov interference
A: Variety of goods/services  consumer satisfaction
D: Does not provide for everyone’s basic needs
D: Relatively high degree of uncertainty
D: Market econs can fail under certain conditions

5. More on Market Economies
To be effective:
Markets must be reasonably competitive
Free movement of resources
Adequate available info
4 important characteristics:
Economic freedom
Voluntary exchange
Private property
Profit motive

6. SSEF5 Describe the roles of government in the United States economy.
a. Explain why government provides public goods and services, redistributes income, protects property rights, and resolves market failures.
b. Explain the effects on consumers and producers caused by government regulation and deregulation.

7. 4 Roles of Government
PROTECTOR: misleading st, impure prod, hazard/unsafe, prop rts, contracts, lemon laws
PROVIDER/CONSUMER: defense, education, welfare, parks, transp, libraries
REGULATOR: competition, interstate commerce, communications, banks, nuclear power
PROMOTOR OF NATIONAL GOALS: minimum wage, bailouts

8. 6 Functions of Gov
Provide public G/S: not w/held even if not paid for + shared consumption (doesn’t reduce amt available for others to consume); nat’l defense, roads
Correct for externalities: correct for over/underproduction of G/S w/ taxes, regulations, & subsidies; pollution controls, educ, health service
Maintain competition: or when not available, gov regulate w/ price control, output, & quality
Establish legal framework: prop rts (capital)
Redistribute income: Gov tax, spends; SS, Medicare
Macroeconomic stabilization policies (reduce inflation & unemployment): fiscal & monetary policy
G/S that cant be w/held from those who don’t pay will not be provided by private sector b/c producers know they will not be able to sell these goods or services.
Competition: if 1 producer can produce total mkt output for a product at a unit cost that is lower than the cost incurred by 2 or more producers, competition may not be possible

9. Other Organizations/Institutions
Nonprofit Organizations
Cooperatives
Labor unions…..collective bargaining
Professional Associations (ABA, AMA, NEA)
Chamber of Commerce
Better Business Bureau
Gov direct v indirect roles as econ inst (produce/distribute G/S v mkt umpire, grant $) (TVA, natl def v regulate utilities, VA benefits)

10. Nonprofit Organizations
Professional Organizations
Professional organizations work to improve the image, working conditions, and skill levels of people in particular occupations.
Business Associations
Business associations promote the business interests of a city, state, or other geographical area, or of a group of similar businesses.
Trade Associations
Nonprofit organizations that promote the interests of particular industries are called trade associations.
Labor Unions
A labor union is an organized group of workers whose aim is to improve working conditions, hours, wages, and fringe benefits.
Institutions that function like business organizations, but do not operate for profits are nonprofit organizations. Nonprofit organizations are exempt from federal income taxes.
-Public schools, Red Cross, hospitals, churches, YMCA’s

11. Business Franchises
A business franchise is a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area.
Franchisers develop products and business systems, then local franchise owners help to produce and sell those products.
Franchises allow owners a degree of control, as well as support from the parent company.
7-11, McDonalds, Pizza Hut, Panda Express, KFC, Jiffy Lube, Hilton Hotels, Gold’s Gym, Big O Tires, Avis Rent-a-Car

12. Advantages and Disadvantages of Business Franchises
Management training and support
Standardized quality
National advertising programs
Financial assistance
Centralized buying power
Disadvantages of Business Franchises
High franchising fees and royalties
Strict operating standards
Purchasing restrictions
Limited product line
PAIR/SHARE: Would you start your own franchise business? Why or why not? What are the advantages and disadvantages?