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Economic Systems: Directions

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Presentation on theme: "Economic Systems: Directions"— Presentation transcript:

1 Economic Systems: Directions
On pages you will create a 2 column note sheet. On the left side, you will copy the slides and on the right side you will answer questions, write examples and things that come to your mind as you are copying the slides.

2 Economic System The way that a nation uses its resources to satisfy its people’s needs and wants. Answers: What to produce How to produce For whom to produce (how to distribute goods and services to people)

3 Command Economy (Socialism)
Government owns and controls production, businesses Government plans economy: decides what and how to produce, sets prices and wages Government distributes goods and services to people according to need. No private property. Spirit of cooperation, not competition Examples: (you fill in on the right side of your paper)

4 Market Economy (Capitalism)
Individuals own factors of production, businesses Marketplace -- consumer demand -- decides what to produce and how -- not government. “Invisible hand” guides The market sets prices and wages “Laissez-faire” -- let people do as they choose Examples:

5 Your Turn Imagine you are the leader of a newly created country on a tropical island. Explain how you will create an economy and what questions you will have to answer.

6 U.S. Market Economy: Free Enterprise System
U.S. economic system based on goals: Freedom Efficiency Equity Stability Security Growth

7 How can we measure the U.S. Economy?
How do we measure whether our economic system is accomplishing the goals listed on the previous slide?

8 U.S. Market Economy: 6 Characteristics
1. Government has a limited role: Regulations on businesses to protect workers and consumers, provides some services 2. Free Enterprise: Can own business, some restrictions

9 3. Freedom of Choice: Consumer choices decide what will be produced, some government rules protect consumers 4. Profit incentive: Desire to make money makes people take risks to start businesses

10 5. Private property: Individuals or groups own property, not government
6. Competition: Rivalry among businesses provides better quality goods, services, prices

11 America’s Market Economy
Free enterprise system Another term for America’s capitalist system Individuals free to own and control businesses Government sets some regulations

12 America’s Market Economy
Freedom of choice: Buyers, not sellers, decide what will be produced -- consumer demand Some government regulation protects consumers

13 America’s Market Economy
Profit incentive: Desire to make money drives entrepreneurs to start and invest in businesses to make goods, provide services. Self-interest Profit: Money remaining after costs of production paid

14 America’s Market Economy
Private property: Property owned by individuals, businesses -- not government

15 America’s Market Economy
Competition: Desire for profit encourages individuals and businesses to compete … for best prices and quality

16 Create a Cost-Benefit Analysis
What are the costs and benefits of the U.S. Capitalist System? What are the costs and benefits of a command economic system?

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