Chapter 2.4: Mixed EconomiesChapter 2.4: Mixed EconomiesChapter 2.4: Mixed EconomiesChapter 2.4: Mixed Economies

Slide 2Copyright © Pearson Education, Inc.Chapter 2, Section 4

Bell Ringer DiscussionBell Ringer Discussion

• On a piece of paper, list three examples of ways in which the U.S government or state government provides goods/services or regulates how goods/services are provided.

• Share

• What would happen if those were privately owned?

• Why do you think our gov’t intervenes in the market in instances we stated?

Slide 3Copyright © Pearson Education, Inc.Chapter 2, Section 4

The Rise of Free MarketsThe Rise of Free Markets

• Even free market thinkers like Adam Smith recognized the need for a limited degree of government involvement in the economic marketplace.

• In a mixed economy, the market is free but has a certain degree of government control

Slide 4Copyright © Pearson Education, Inc.Chapter 2, Section 4

IntroductionIntroduction

• What are the characteristics of a mixed economy?– A mixed economy is characterized by:

• A market-based economy with some government intervention

• Government helps societies meet needs that would be too difficult for them to meet under a totally free market economy, such as education

• Government protects property rights and ensures that exchanges in the marketplace are fair

Slide 5Copyright © Pearson Education, Inc.Chapter 2, Section 4

The Rise of Free MarketsThe Rise of Free Markets

Laissez faireBelief that gov’t generally should not intervene in the marketplace

Since Adam Smith’s time, government intervention in the market has increased.

Slide 6Copyright © Pearson Education, Inc.Chapter 2, Section 4

The Rise of Free Markets, cont.The Rise of Free Markets, cont.

– What is one reason the government plays a role in the economy?

– The government:

• Provides national defense and public education

• Protects private property

• Ensures fair exchanges in the marketplace

– (Laws require businesses to give honest information to consumers)

Slide 7Copyright © Pearson Education, Inc.Chapter 2, Section 4

Reebok Pays $25 Million to Settle FTC Claims of False Ads for Toning Shoes

Slide 8Copyright © Pearson Education, Inc.Chapter 2, Section 4

How do we know?How do we know?

Car’s horsepower?

Slide 9Copyright © Pearson Education, Inc.Chapter 2, Section 4

The Rise of Free MarketsThe Rise of Free Markets

Mixed economyMarket-based economic system in which the gov’t is involved to some extent.

Since Adam Smith’s time, government intervention in the market has increased.

Slide 10Copyright © Pearson Education, Inc.Chapter 2, Section 4

Circular Flow Model of a Market EconomyCircular Flow Model of a Market Economy

Slide 11Copyright © Pearson Education, Inc.Chapter 2, Section 4

Circular Flow Model of a Mixed EconomyCircular Flow Model of a Mixed Economy

Slide 12Copyright © Pearson Education, Inc.Chapter 2, Section 4

Comparing Mixed EconomiesComparing Mixed Economies

• Most modern economies are mixed economies. – The figure below shows a continuum of mixed

economics in today’s world.– Why is China a little bit farther to the right on the

diagram below than Cuba?

Slide 13Copyright © Pearson Education, Inc.Chapter 2, Section 4

North Korea and ChinaNorth Korea and China

• China, is closer to the center of the because they are going through an economic transition toward privatization of state-owned firms.

Slide 14Copyright © Pearson Education, Inc.Chapter 2, Section 4

Hong Kong- All the way on the right!?!?!Hong Kong- All the way on the right!?!?!• Hong Kong represents one of the world’s

freest markets. – The government protects private property and

rarely interferes in the free market, aside from establishing wage and price controls on rent and some public services.

• Wait!? Isn’t Hong Kong part of China?– It is. It operates under a “One country, two

systems” policy. • Hong Kong has it’s own money

• Need a visa to enter China from Hong Kong

Slide 15Copyright © Pearson Education, Inc.Chapter 2, Section 4

Head-to-Head Battle pg 42Head-to-Head Battle pg 42

• Helmet Makers• Doctors• State Gov’t• Anti-helmet lobbyists

• Once in groups, use the article and internet to support your belief! Are you for or against helmet laws? Assume we live in PA

• Map

Slide 16Copyright © Pearson Education, Inc.Chapter 2, Section 4

Mixed EconomiesMixed Economies

PrivatizationGov’t sells business/service to individuals and allows them to compete in the marketplace.

Economic transition- period of change when a nation moves from one economic system to another

“8 Ways Privatization Has Failed America”

– On my Wiki, skim it, discuss

Slide 17Copyright © Pearson Education, Inc.Chapter 2, Section 4

So what’s our economy!?So what’s our economy!?• Market economy by

definition – “an economy in which the resources are owned and controlled by the people of the country”

• The United States is a mixed economy whose foundation is the free market.

• It is characterized as a free enterprise system.

Slide 18Copyright © Pearson Education, Inc.Chapter 2, Section 4

Mixed EconomiesMixed Economies

Free enterprise systemEconomic system characterized by private OR corporate ownership of goods.

In a F.E.S, investments in firms are made in a free market by private decision…gov’t has no say!