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ECONOMICS. ECONOMIC SYSTEMS  METHOD USED BY A SOCIETY TO PRODUCE AND DISTRIBUTE GOODS AND SERVICES.

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Presentation on theme: "ECONOMICS. ECONOMIC SYSTEMS  METHOD USED BY A SOCIETY TO PRODUCE AND DISTRIBUTE GOODS AND SERVICES."— Presentation transcript:

1 ECONOMICS

2 ECONOMIC SYSTEMS  METHOD USED BY A SOCIETY TO PRODUCE AND DISTRIBUTE GOODS AND SERVICES

3 THREE ECONOMIC QUESTIONS  WHAT GOODS AND SERVICES SHOULD BE PRODUCED?  HOW SHOULD THESE GOODS AND SERVICES BE PRODUCED  WHO CONSUMES THESE GOODS AND SERVICES

4 WHAT SHOULD BE PRODUCED?  HOW MUCH OF OUR RESOURCES SHOULD WE DEVOTE TO: –DEFENSE? –EDUCATION? –PUBLIC HEALTH? –CONSUMER GOODS?

5 HOW SHOULD GOODS AND SERVICES BE PRODUCED?  HOW TO USE OUR RESOURCES  SHOULD WE PRODUCE ELECTRICITY WITH OIL? SOLAR POWER? NUCLEAR?  DETERMINE HOW TO USE OUR FACTORS OF PRODUCTION

6 COMBINING FACTORS OF PRODUCTION O O O O O O 1 acre20 WORKERSCAPITAL++ 1 acre2 WORKERSCAPITAL++ = = 10 BUSHELS OF CORN 50 BUSHELS OF CORN

7 WHO CONSUMES GOODS AND SERVICES  SOCIETIES MUST DECIDE HOW TO DISTRIBUTE THE AVAILABLE GOODS AND SERVICES  DISTRIBUTION IS DETERMINED BY HOW SOCIETIES CHOOSE TO DISTRIBUTE INCOME  HOW DO WE DECIDE HOW MUCH LAND IS WORTH?  HOW MUCH MONEY SHOULD TEACHERS EARN? DOCTORS?  EACH SOCIETY ANSWERS THE QUESTION OF DISTRIBUTION BASED ON SOCIAL VALUES AND GOALS

8 GENERAL ECONOMIC GOALS OF SOCIETIES  ECONOMIC EFFICIENCY: MAKING THE MOST OF RESOURCES  ECONOMIC FREEDOM: FREEDOM FROM GOVERNMENT INTERVENTION IN THE PRODUCTION AND DISTRIBUTION OF GOODS AND SERVICES  ECONOMIC SECURITY & PREDICTABILITY: ASSURANCE THAT GOODS & SERVICES WILL BE AVAILABLE, SAFETY NETS WILL PROTECT INDIVIDUALS IN TIMES OF ECONOMIC DISASTER  ECONOMIC EQUITY: FAIR DISTRIBUTION OF WEALTH  ECONOMIC GROWTH: INNOVATION LEADS TO GROWTH AND GROWTH LEADS TO A HIGHER STANDARD OF LIVING  OTHER GOALS: SOCIETIES PURSUE ADDITIONAL GOALS, SUCH AS ENVIRONMENTAL PROTECTION

9 4 MAIN ECONOMIC SYSTEMS

10 TRADITIONAL  BASED ON CUSTOMS AND BELIEFS –AGRICULTURE –HAND CRAFTED GOODS –USED IN AFRICA AND PARTS OF SOUTH AMERICA OF SOUTH AMERICA

11 COMMAND  INDIVIDUALS HAVE LITTLE (IF ANY) INFLUENCE OVER ECONOMIC DECISIONS  GOVERNMENT CONTROLS FACTORS OF PRODUCTION  USED IN:  NORTH KOREA  CHINA  LAOS  CAMBODIA  CUBA  VIETNAM  (FORMER SOVIET UNION)

12 MARKET  GOVERNMENT HAS NO INTERVENTION IN ECONOMIC DECISIONS  USED WHERE?

13 MIXED  CONTAINS CHARACTERISTICS FROM ALL ECONOMIC SYSTEMS  VERY COMMON THROUGHOUT THE WORLD  USED IN THE UNITED STATES

14 CAPITALISM  A. DEFINITION: –MEANS OF PRODUCTION ARE PRIVATELY OWNED –SUPPLY AND DEMAND DETERMINE PRICES –BUSINESS HAS FREEDOM TO MAKE DECISIONS

15 CAPITALISM B. ADAM SMITH 1.THE WEALTH OF NATIONS 1776 C. LAISSEZ FAIRE THEORY – “HANDS OFF” 1) Capitalism without government regulation 2) Laissez faire Capitalism was blamed for the following conditions following the Industrial Revolution 1) CHILD LABOR 2) LOW WAGES 3) NO BENEFITS (UNEMPLOYMENT) 4) DANGEROUS/UNHEALTHY WORKING CONDITIONS

16 CAPITALISM 3)FREE ENTERPRISE ( capitalistic ideal) 1. EQUAL OPPORTUNITIES 2. SUCCESS AND FAILURE

17 ADVANTAGES EFFICIENCY: Many buyers and sellers, resources are used in the most profitable way Many buyers and sellers, resources are used in the most profitable way FREEDOM: Producers have freedom (profit motive), Producers keep the fruits for their efforts SATISFACTION: Variety of products are produced to satisfy the consumer

18 DISADVANTAGES  PURE CAPITALISM (Laissez-Faire) Ignores: –The poor –The unemployed –The elderly *Develops a wide range of “social classes” *Monopolies/Oligopolies can be developed

19 MIXED CAPITALISM  INDIVIDUALS CONTROL ASPECTS OF BUSINESS WITH GOVERNMENT REGULATIONS  UNITED STATES

20 SOCIALISM  DEFINITION:  BELIEF THAT DEMOCRATIC MEANS SHOULD BE USED TO DISTRIBUTE WEALTH EVENLY THROUGHOUT A SOCIETY

21 SOCIALISM A)CHARACTERISTICS 1) COLLECTIVE OWNERSHIP 2) DEMOCRATIC IDEALS 3) RE-DISTRIBUTION OF WEALTH TO PREVENT CONCENTRATION OF WEALTH PREVENT CONCENTRATION OF WEALTH B)GOVERNMENT RESPONSIBILITIES 1) FREE MEDICAL AND DENTAL 2) FREE EDUCATION 3) SOCIAL SECURITY 4) HOUSING 5) GUARANTEED EMPLOYMENT

22 ADVANTAGES  EQUALITY (Wages are nearly identical)  SOME SOCIAL BENEFITS (health care, education, military defense)  FULL EMPLOYMENT

23 DISADVANTAGES  LESS EFFICIENT THAN CAPITALISM (MORE WORKERS THAN NECESSARY)  TAXES ARE VERY HIGH

24 COMMUNISM  EXTREME FORM OF SOCIALISM  DEFINITION: –ALL PROPERTY IS COLLECTIVELY OWNED –LABOR IS ORGANIZED FOR THE COMMON ADVANTAGE OF THE COMMUNITY –EVERYONE CONSUMES ACCORDING TO NEEDS

25 COMMUNISM  B) ECONOMIC AND POLITICAL POWER RESTS IN THE HANDS OF THE CENTRAL GOVERNMENT (DICTATOR)

26 ADVANTAGES  UNFORTUNATE AND UNPRODUCTIVE PEOPLE STILL SHARE IN THE BENEFITS  PEOPLE USE ELECTORAL POWER TO INFLUENCE MANY OF THE WHAT, HOW, AND FOR WHOM QUESTIONS

27 DISADVANTAGES  INDIVIDUAL FREEDOM LOST  NO INCENTIVES  FAILS TO MEET THE WANTS OF CONSUMERS  LACKS FLEXIBILITY TO DEAL WITH CHANGES  HIGH TAXES

28 COMMUNISM  BACKGROUND OF KARL MARX 1) COMMUNIST MANIFESTO (1848) * Short book, talked of revolt 2) DAS KAPITAL *Outlined: A) WHAT IS WRONG WITH CAPITALISM A) WHAT IS WRONG WITH CAPITALISM B) HOW COMMUNISM WOULD TAKE OVER B) HOW COMMUNISM WOULD TAKE OVER C) WHAT THE FUTURE UTOPIA WOULD BE LIKE C) WHAT THE FUTURE UTOPIA WOULD BE LIKE

29 COMMUNISM  MARX THEORIES 1) Dialectical Materialism Class struggle between the proletariat and the bourgeoisie which will end in revolution and the triumph of communism PROLETARIAT: WORKERS BOURGEOISIE: WEALTHY CAPITALISTS 2) Law of Capitalist Accumulation -Rich get Richer/ Poor become poorer 3) Labor Theory of Value -Value of a product comes from the labor put into the product -Thus the worker should receive the benefit of the product…….not the business owner

30 Communism 4)Instances where Marx was wrong 1)“Communism would start in Industrialized Europe or the U.S.” – not in agrarian U.S.S.R 2)“Communist government will wither away”

31 FASCISM A. Definition: A form of capitalism (private ownership) with strict government control *Wages*Prices*Production B.Involves a Dictatorship C.Extreme Nationalism – Militaristic D.Racial Purity


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