1. Economic Systems

2. Free Enterprise n Emphasizes the importance of individuals. Government is secondary to that of the individuals. n Businesses and consumers make the decisions that are in their own best interests, free of government regulations. n Businesses produce what they think will make a profit, deciding themselves how best to make their products.

3. Characteristics of Free Enterprise n Ownership of Private property – individuals are allowed to own and control things Freedom to Make a Profit individuals and business can gain from the risks that they take. Competition competition is allowed and encouraged. It encourages businesses to produce a variety of products, so that consumers are able to shop for the quality and price they want.

4. Advantages of Free Enterprise n Freedom To Make Economic Decisions – Businesses can produce any product or service, in any way they choose, as long as it is legal. – Consumers are free to choose one brand over another. They can buy as many products or services as they can afford. Efficient Use of Resources businesses can use resources (land, labour, capital, management) the most efficient way to reduce costs. This benefits the producer and consumer.

5. n Introduction of New Products and Services – Businesses can increase profits by making new products. Products are created to satisfy consumers’ needs or wants as well as to make a profit fot the owner. Better Quality at Lower Prices Businesses that provide poor-quality products/services and charge high prices usually lose customers. Businesses that satisfy customer needs and wants will survive and prosper.

6. Disadvantages of Free Enterprise n Uneven Distribution of Resources – This type of economic system results in a greater gap between the “rich” and “poor”. Some individuals, who take the risk and exhibit initiative, will benefit from this system. At the same time, others are less able to benefit in such a system. Unhealthy Products Products due to less government regulation, this economic system permits the manufacture of a great variety of products, including dangerous products.

7. Centrally Planned n Ownership of Property – private ownership of property is restricted or disallowed entirely. The government (State) owns the natural resources, thus giving them control and the ability to manage the country’s scarce resources. Profits All profits belong to the “State”. The government decides for whom goods and services are made available and at what price. Profit is NOT a motive behind economic decisions.

8. n Competition – is not necessary because all businesses are virtually owned by the government. There is only one producer of each product in the economy, therefore, there is no competition. – For example, the Lada was a car produced under the Former Soviet Union. It was the only car made available to the public in that state. Consumers had no alternative!

9. Advantages of Centrally Planned Economies n Many Social Services – Government provides a standard level of education, health care, housing, transportation, pension, etc.. – Citizens receive basic care and services from birth to death. – Programs benefit ALL of society, rather than those who can afford it.

10. n Guaranteed Basic Standard of Living – Employees receive a set level of wages and salaries, regardless of their talents and abilities. – Greater attentionis paid to the entire group, rather than one individual. Efficient Use of Resources There are no wasted resources because one large government does all of the planning in the nation.

11. Disadvantages of a Centrally Planned Economy n Restrictive Freedoms – Individuals are not greatly involved in economic or other types of decision making. Government controls individual speech, religion, job selection and housing location. – Disobedience may result in imprisonment. No Individual Incentive Citizens have no incentive to work hard because the benefits go to the government. This results in less creativity by individuals and less risk-taking.

12. Characteristics of a Mixed Free Enterprise Economy n Ownership of Private property – individuals are allowed to own and control things, however, there is government intervention. – For example, in Canada, the “state” regulates who can buy banks, what goods can be imported/exported, where certain businesses can be located, and the hours during which businesses can operate.

13. Profit profit is encouraged, however the government applies many taxes that reduce the amount of profit. (profit tax, sales tax, excise tax, tariffs, property tax) Competition Competition is promoted in a mixed free enterprise system, however, any level of government can set up a business of its own to provide competition. The government uses laws to create and to control competition.

14. Advantages of a Mixed Free Enterprise Economy n Individual Incentive – individuals who work hard and take initiative, can make extra money and keep it. Basic Social Services All individuals have access to the essential social services. The less advantages can still have an acceptable level of housing, education, and health care, because they are provided free or at a low cost. Consumer Protection products require safety testing, businesses require licensing and monitoring -- these all protect us!

15. Disadvantages of a Mixed Free Enterprise Economy n High Taxation – Taxes are very high thus discouraging businesses and individuals – Businesses must follow many rules and regulations and prepare reports for the government Less Incentive Due to the guaranteed standard of living, individuals may not be tempted to work hard. Those who do work hard, do not receive all of their earned benefits due to the high taxation.

16. The range of Economic Systems – United States Canada Sweden North Korea