Economic SystemsEconomic Systems

What is an economy???What is an economy???

• What we’ll learn:What we’ll learn:– What is meant by the term What is meant by the term economyeconomy– The The factors of productionfactors of production– The concept of scarcityThe concept of scarcity– The difference between a traditional, a

market, a– command, and a mixed economy

EconomyEconomy

• The way in which a nation makes economic choices.

• Also called an economic system.

Resources=Factors of Resources=Factors of ProductionProduction

• Resources are all the things used in producing goods and services. The technical term for it is factors of production.

Factors of ProductionFactors of Production

– Natural resources-Natural resources-raw materials are raw materials are used to make goods. Ex: land, water, used to make goods. Ex: land, water, forests, minerals, soil, and climateforests, minerals, soil, and climate

– Labor resources-Labor resources-Workers are needed Workers are needed with the appropriate knowledge, skills, with the appropriate knowledge, skills, and experience to make goods or and experience to make goods or provide servicesprovide services

Factors of ProductionFactors of Production

– Capital resources-Capital resources-machines, factories, machines, factories, and supplies are neededand supplies are needed

– Entrepreneurs-Entrepreneurs-these are the people these are the people who bring natural resources, labor who bring natural resources, labor resources, and capital resources resources, and capital resources together to produce goods and servicestogether to produce goods and services

Economic systems are Economic systems are necessary because:necessary because:

• Scarcity -- no one country has enough resources to supply everything that is needed or wanted which creates scarcity.

• Scarcity forces nations to make economic choices.

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• Nations must answer three basic questions when

deciding how to use their limited resources.– What goods and services will be produced?– How should goods and services be

produced?– For whom should the goods and services be

produced?

Types of Economic Types of Economic SystemsSystems

• Traditional Economy – Traditions and rituals answer the basic questions. Answers are often based on cultural or religious practices and ideals that have been passed down for generations.– http://www.wisegeek.com/what-is-a-trad

itional-economy.htm– http://www.buckinvestor.com/basics/

economic_systems.shtml

Types of EconomiesTypes of Economies

• Market Economy – In a pure market economy there is no government involvement in economic decisions.– http://www.practicalmoneyskills.com/fo

reducators/econ101/20090626_economy.php

– http://www.buckinvestor.com/basics/economic_systems.shtml

Types of EconomiesTypes of Economies

• Command Economy – A system in which the

government controls the factors of production and makes all decisions about their use.– http://www.practicalmoneyskills.com/fohttp://www.practicalmoneyskills.com/fo

reducators/econ101/20090626_economyreducators/econ101/20090626_economy.php.php

– http://www.buckinvestor.com/basics/economic_systems.shtml

Types of EconomiesTypes of Economies

• Mixed Economies –All economies in the world today (including the Free Enterprise System in the U.S.) are mixed with varying degrees of government regulation.– http://www.practicalmoneyskills.com/fohttp://www.practicalmoneyskills.com/fo

reducators/econ101/20090626_economyreducators/econ101/20090626_economy.php.php

– http://www.buckinvestor.com/basics/economic_systems.shtml

Types of Mixed Types of Mixed EconomiesEconomies

• Capitalism -- Characterized by private ownership of businesses and marketplace competition.

• Socialism – there is increased government involvement in people’s lives and the economy.– Tend to have more social services to ensure acertain standard of living for everyone– Government runs key industries and makes economic decisions

Types of Mixed Types of Mixed EconomiesEconomies

• Communism – Countries have a totalitarian form of government, which means that the government runs everything.

-All who are able to work are assigned jobs

-Housing and schooling are decided by the government

Civic DutiesCivic Duties

Civic DutiesCivic Duties

• CitizenshipCitizenship – the combination of – the combination of duties and rights of a citizen. Good duties and rights of a citizen. Good citizenship meanscitizenship means

• U.S. Citizens rights come with U.S. Citizens rights come with responsibilities…we call these responsibilities…we call these responsibilities, “civic duties.”responsibilities, “civic duties.”

Paying TaxesPaying Taxes

• Pay for the benefits and services that Pay for the benefits and services that citizens receive from the government citizens receive from the government (income tax, social security tax, (income tax, social security tax, property tax, medicare tax, etc.)property tax, medicare tax, etc.)

VotingVoting

• Citizens should learn about Citizens should learn about candidates and issues to make candidates and issues to make informed decisions when they vote.informed decisions when they vote.

Jury DutyJury Duty

• Serve on juries to decide court cases Serve on juries to decide court cases (jury duty).(jury duty).

MilitaryMilitary

• May need to serve in defense of your May need to serve in defense of your country.country.

VolunteeringVolunteering

• Work to protect the environment, Work to protect the environment, support communities, and help the support communities, and help the underprivileged.underprivileged.

Obey the Law!Obey the Law!

• Live within the laws.Live within the laws.