1. Do Now Please give me an example of the following resources: Human
Natural
Capital
What are some questions a person must ask themselves if they want to open a business?

2. Scarcity Means There Is Not Enough For Everyone
Government must step in to help allocate (distribute) resources

3. How the Government Influences How I Make Money
Economic Systems
How the Government Influences How I Make Money

4. Economic Systems
Def: The method used by a society to produce and distribute goods and services
Or, how the government tells us what we can get and how to get it

5. All Economic Systems Must Consider the Following Questions:
What goods and services to produce?
How will they produce them?
Who will get them?
How much will they produce now, and how much later?
Each economic system answers these questions in a DIFFERENT WAY

6. Types of Economic Systems
There are 3 basic types of economic systems.

7. 1. Traditional Economy
Economic questions are answered by habits and customs (The way it has always been done)
Children work the same jobs parents worked often farming or hunter/gatherer
Fear Change!
Ex. Eskimos, the Amish, Pigmies, Bush People

8. 2. Command Economy The government answers the basic economic questions
Advantages: able to act quickly in emergencies, provide for all people equally
Disadvantages: Inefficient, no incentive to work hard or be creative
Ex. Communist Countries (China?, Vietnam, North Korea, former Soviet Union, Cuba)

9. 3. Free Market Economy
Economic questions are answered by individual buyers and sellers.
Laissez Faire = Let it be
Supply and demand influence economy
People act out of self interest; motive for profit (money) drives the economy
Also known as FREE ENTERPRISE or CAPITALISM
Ex. The United States, Western Europe, Japan

10. I lied!
I said there were 3 types of economic systems, but there is a 4th!
Mixed Economy: No economy is pure market, pure command or pure traditional, elements of each appear in all economies, some may have more elements of one economy than another.
Market – USA
Mixed – Great Britain
Command – China

11. Do Now
Using your understanding of economic systems, please answer the following question:
In your opinion, what economic system is the least effective in meeting ALL the needs and wants of its people?

12. American Mixed Economy
While the US is mostly a free market economy, it does have elements of a command economy.

13. Example of Free Market
Example of how the free market regulates itself:
If consumers want computers and only one company is making them…
Other businesses have the INCENTIVE to start making computers to earn PROFIT.
This leads to more COMPETITION….
Which means lower prices, better quality, and more product variety.
We produce the goods and services that society wants because “resources follow profits”.
The End Result: Most efficient production of the goods that consumers want, produced at the lowest prices and the highest quality.

14. The Invisible Hand
The concept that society’s goals will be met as individuals seek their own self-interest.
Example: Society wants fuel efficient cars…
Profit seeking producers will make more.
Competition between firms results in low prices, high quality, and greater efficiency.
The government doesn’t need to get involved since the needs of society are automatically met.
Competition and self-interest act as an invisible hand that regulates the free market.

15. Attacks Against Capitalism
Companies are greedy and do anything to screw over consumers!
Companies have an incentive to satisfy the needs of consumers. If they don’t they will go out of business.
Capitalism causes companies to outsource US jobs overseas. America suffers because companies want more profit!
How many of you lost your job to outsourcing?
How many of you benefit in the form of lower prices?
Capitalism only helps the rich. US companies enslave and exploit third-world workers in sweatshops!
Sweatshop workers are not forced labor. They make the decision to work there voluntarily. Why?
Although the working conditions are far below US standards, working in a sweatshop is better that the alternative
Sweatshop wages in Vietnam, Honduras, and Nicaragua are more than double the country’s average wage. 15

16. Advantages and Disadvantages
What is GOOD about Communism?
What is BAD about Communism?
Low unemployment-everyone has a job
Great Job Security-the government doesn’t go out of business
Equal incomes means no extremely poor people
Free Health Care
No incentive to work harder
No incentive to innovate or come up with good ideas
No Competition keeps quality of goods poor.
Corrupt leaders
Few individual freedoms

17. Features of America Free Market Economy
Economic Freedom: Individuals have the right to choose.
Competition: more than one producer of good/services ensures choice.
Private Property: Individuals have the right to own their own property, including business

18. Features cont
4. Self-Interest- individuals make decisions based on what is best for them. 5. Voluntary Exchange: Individuals may freely buy and sell goods 6. Profit Motive: Ind. are driven by a desire to profit(make money)

19. Features of American Command Economy
Government regulation of some business practices. Ex. Wages, labor hours, safety practice.
Government limits certain choices. Ex Cannot buy or produce certain goods/services.
Gov’t provides aid to the needy. Ex Medicare, Medicaid, welfare

20. My Pizzeria
How would my pizzeria function under different economic systems?

21. My Pizzeria in a Free Market
I answer the basic economic questions!
I determine how much cheese and pepperoni goes on the pizza
I determine the quality of cheese and pepperoni
I set my employee wages
I set my business hours

22. My Pizzeria in a Command Economy
The government answers the basic economic questions
The gov’t sets the amount of cheese and pepperoni on each pizza
The gov’t determines the quality of chees and pepperoni
The gov’t sets employees wages
The gov’t sets business hours
Problem: What does the gov’t know about pizza?

23. My Pizzeria in a Mixed Economy
The gov’t and I both answer the basic economic questions
I determine the amount of cheese and pepperoni on the pizza; gov’t determines the quality of cheese and pizza
I set employee wages; gov’t set minimum wage for employees
I determine business hours: gov’t determines whether I am safe to be open or not

24. South Korea's GDP is $1.3 Trillion (32 times greater).
The difference between North and South Korea at night. North Korea's GDP is $40 Billion
South Korea's GDP is $1.3 Trillion (32 times greater).

25. Homework
Please answer the following question in a ONE paragraph response:
In your opinion which economic system is the most beneficial for the lower, middle and upper class? You can have more than one answer