Presentation on theme: "Three Types of Economies"— Presentation transcript:
1 Three Types of Economies Chapter 13.3Three Types of Economies
2 What is Economics?Economics studies how individuals and societies seek to satisfy needs and wants through incentives, choices, and allocation of scarce resources.TechnologyLandOil & fuelDoctors
3 Factors of Production Economic Resources Natural Resources – raw materials found in nature that are used to produce goodsHuman Resources – people’s knowledge, efforts, and skills used in their workCapital Resources – used to produce goods and services (buildings, materials, and equipment)Entrepreneurial Resources - recognize the need for new goods or serviceScarcity – shortage of resources
4 Why Economic Systems?Nations use economic systems to determine how to use their limited resources effectively.Primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.Different types of Economic SystemsTraditional EconomyMarket Economy (free enterprise)Command EconomyMixed Economy
5 Traditional Economy Found in rural, under-developed countries– VanuatuPygmies of CongoEskimos & Indian tribesBelarusCustoms govern the economic decisions that are madeFarming, hunting and gathering are done the same way as the generation beforeEconomic activities are centered around the family or ethnic unitMen and women are given different economic roles and tasksAdvantages: people have specific roles; security in the way things are doneDisadvantages: Technology is not used; difficult to improve
6 Market Economy (Free Enterprise) Also called a Free Market Economy or Free Enterprise EconomyBusinesses and consumers decide what they will produce and purchase and in what quantitiesDecisions are made according to law of supply & demandSupply and demand of goods and services determine what is produced and the price that will be charged.Advantage— competition to have the best products and servicesDisadvantage—huge rift between wealthy and poorNote: a true market economy does not exist.
7 Continued……………………………. Competition in all aspects of economy (jobs, products, services, etc)Profit seeking economy: “How much profit will I make on this good/service and is it worth the risk?”Also called free enterprise and capitalismFE=free to undertake economic activitiesC=people make their own decisions on how to save capital and spend capital resources.
8 Command EconomyThe government (or central authority) determines what, how, and for whom goods and services are produced.Two types:Strong Command – where government makes all decisions (communism – China, Cuba)Moderate Command – where some form of private enterprise exists but the state owns major resources (socialism – France and Sweden)AdvantagesGuarantees equal standard of living for everyoneLess crime and povertyNeeds are provided for through the governmentDisadvantagesMinimal choicesFewer choices of itemsNo incentive to produce better product or engage in entrepreneurshipAlso known as a Planned or Managed Economy
9 Mixed Economy Combination of a market and a command economy Government takes care of people’s needsMarketplace takes care of people’s wants.Most nations have a mixed economy: United States, England, AustraliaAdvantage— balance of needs and wants met by government and in marketplaceDisadvantage— citizens have to pay taxes
10 Modern-day (mixed)Economies The Economy of China:Before 1980’s was a command economyOne party government w/control of major resources’s the government moved toward a mixed economy when privately owned companies and overseas investment was allowedThe Economy of the U.S:Considered a free enterprise economyIndividuals/businesses own factors of productionBusinesses free to competeConsumers free to buy/consume what they wantLittle government intervention (there are some parts of the economy that are controlled by government)