1. ECONOMIC SYSTEMS AND HISTORICAL FIGURES
Chapter 2

2. OBJECTIVES
Identify the three key economic questions that all societies must answer
Examine the different types of economic systems
Analyze the free enterprise system
Explore historical figures in economics and their contributions to world economies
Economics-Biba S. Kavass

3. 3 Basic Economic Questions

4. WHAT? HOW? FOR WHOM?

5. Economics-Biba S. Kavass

6. EXAMPLES OF ECONOMIC SYSTEMS
Traditional
Aborigines - Australia
Tribes - Africa
Tribes – South America
Command
China
Cuba
Laos
North Korea
Market/Mixed
United States
Europe
Canada
Economics-Biba S. Kavass

7. Economic Goals and Societal Values
Importance attached to these determines how the 3 key economic questions are answered
Economic Efficiency – key is to accurately assess what people need and want
Economic Freedom – right to make choices
Economic Security – right to work, get paid, and purchase wants/needs
Economic Equity – fairness as to who has access to what
Economic Growth- prosperity and increased progress
Economics-Biba S. Kavass

8. Standard of Living
Quality of life based on ownership of necessities and luxuries that make life easier
Factors based on:
Income
Employment
Education
Healthcare

11. Free Enterprise System

12. Free Enterprise System
Characteristics:
Key economic questions are answered by consumers (individuals, firms, and government)
Economic Freedom – individuals and businesses own the factors of production, make what they want, and buy what they want
Voluntary Exchange - exchange of good/services take place in markets – ALL parties expect to GAIN
Competition – lowest prices, best products and service
Incentives – ability to improve standard of living
Specialization – concentration of productive efforts on a limited number of activities
Consumer Sovereignty – consumers have power to decide what is produced
Private property – right of ownership of resources
Economics-Biba S. Kavass

13. INCENTIVES

14. Specialization vs. Division of Labor
Act of focusing on completing a particular task or producing a particular good/service
Can make an economy more efficient, because an individual who specializes in the production of a single good or service can make exchanges to get all the other goods or services he needs
Makes us interdependent – depends on exchange from other consumers
Example – English Teacher or Economics Teacher
Division of Labor
Act of separating the production process into isolated tasks
Works well as long as everybody is pulling their load
Example - assembly line, where workers are assigned
to an isolated task, which they perform repeatedly throughout the workday.
Economics-Biba S. Kavass

15. Role of the Government in Free Enterprise System
Regulating Business – public disclosure, environmental rules, consumer safety, product safety
Promoting Growth - price stability, regulation of banks, patents and copyrights
Providing Public Goods - roads and bridges, defense, police and fire, education
Providing a Safety Net – Social Security, Medicare and Medicaid, unemployment benefits
Economics-Biba S. Kavass

16. Factor Market: where factors of production are bought/sold
Product Market: where producers sell goods/services

17. CHECK FOR UNDERSTANDING
Economics-Biba S. Kavass

18. Historical Figures
Economics-Biba S. Kavass

19. Economics-Biba S. Kavass

20. Jean-Baptiste Say 19th century economist and businessman
Say’s Law - “supply creates its own demand” – production of one good creates the production of other goods
Believed to have coined the term “entrepreneur”
Economics-Biba S. Kavass

21. Karl Marx 19th century German philosopher and economist
Believed that history is a struggle between classes and that workers would overthrow the system and give control to the government
Wrote “Communist Manifesto”
Economics-Biba S. Kavass

22. John Maynard Keynes British Economist
Keynesian Economics - thought that government should intervene in the market economy to smooth out ups/downs instead of waiting for the market to self-correct
Economics-Biba S. Kavass

23. Match the Economists __ Who wrote the Communist Manifesto
__ Who coined the term “entreprenuer”
__ Who believed government should intervene to correct market
___ Who believed the government should “let it be”
Adam Smith
Jean-Baptiste Say
Karl Marx
John Maynard Keynes
Economics-Biba S. Kavass