TYPES OF TYPES OF ECONOMIESECONOMIES

WHAT EVERY ECONOMIC SYSTEM MUST ADDRESS?

1. WHAT to produce?

2. HOW to produce it? Which resource combinations to use? How to distribute it among the system’s members?

3. FOR WHOM to produce?

SCARCE RESOURCESSCARCE RESOURCESvs.vs.

UNLIMITED WANTSUNLIMITED WANTS

ASPECTS OF EFFICIENCYASPECTS OF EFFICIENCY►((efficiencyefficiency = the quality of doing = the quality of doing

something well and without wasting something well and without wasting time, money, or energy)time, money, or energy)

distribution of resourcesdistribution of resources choicechoice costcost qualityquality stabilitystability growthgrowth long-term interestslong-term interests

TYPES OF ECONOMIESTYPES OF ECONOMIES

1. COMMAND OR PLANNED 1. COMMAND OR PLANNED ECONOMYECONOMY

2. MIXED ECONOMY2. MIXED ECONOMY

3. FREE MARKET ECONOMY3. FREE MARKET ECONOMY

PLANNED ECONOMYPLANNED ECONOMY

resourcesresources belong to belong to the state the state (planned(planned by the state)by the state) role of role of government vital government vital ( plans and ( plans and organises the whole production)organises the whole production) production production for need for need rather than profitrather than profit standardised goods, standardised goods, little choicelittle choice more more equal distribution equal distribution of wealth and of wealth and incomeincome► workers less motivated but - workers less motivated but - safe jobssafe jobs

MIXED MIXED ECONOMYECONOMY

resourcesresources allocated by allocated by government government (the public sector) (the public sector) andand by the by the market forces market forces of of demand and supply (the private sector)demand and supply (the private sector) role of government depends on the level of role of government depends on the level of development, provides a development, provides a minimum standard minimum standard

ofof livingliving, ensures , ensures fair competition / a levelfair competition / a level playing fieldplaying field production of production of public goods public goods paid by taxes,paid by taxes, all private sector production for profitall private sector production for profit

FREE MARKET FREE MARKET ECONOMYECONOMY

resourcesresources allocated allocated automaticallyautomatically market mechanism market mechanism (demand & supply)(demand & supply) role of role of government limited government limited (pass laws, (pass laws,

essential products and services like essential products and services like policing, national defence, the judiciary)policing, national defence, the judiciary)

unequal distribution unequal distribution of incomeof income production only for production only for profitprofit planning planning and organising carried out and organising carried out byby firmsfirms

Disadvantage:Disadvantage: a huge rift between the wealthy and the poora huge rift between the wealthy and the poor

1. RB: p 29:1. RB: p 29: FILL IN THE GAPS IN THE TEXT FILL IN THE GAPS IN THE TEXT

2. RB: p 17:a) ADVANTAGES OF FREE MARKET ECONOMIES: ____________________________________ ____________________________________ ____________________________________ ____________________________________B) DISADVANTAGES OF FREE MARKET ECONOMIES: _____________________________________ _____________________________________

C) ADVANTAGES OF PLANNED ECONOMIES ______________________________________ ______________________________________D) DISADVANTAGES OF PLANNED ECONOMIES ______________________________________ ______________________________________ ______________________________________

RRBB: p: 29: p: 29 INSERT THE MISSING WORDS:INSERT THE MISSING WORDS:

  

Some theorists were for less government Some theorists were for less government _________________ and more reliance on the _________________ and more reliance on the ________________ . The basic government role is in ________________ . The basic government role is in _____________________ unemployment. As _____________________ unemployment. As communism _______________, many countries turned communism _______________, many countries turned towards _______________ economies. State towards _______________ economies. State _____________ were sold to private _______________ . _____________ were sold to private _______________ . The central The central planners lost planners lost their control over their control over ____________________. . ___________ and ______________ were no ___________ and ______________ were no longer guaranteed by the state.longer guaranteed by the state.

3. FIND OUT THE DIFFERENCES BETWEEN THE TWO TYPES OF ECONOMIES:

http://www.youtube.com/watch?v=6q3zjyG8Dpg&feature=relatedMarket economy Planned economy________________________ _______________________________________________ _______________________________________________ _______________________________________________ _______________________________________________ _______________________________________________ _______________________________________________ _______________________________________________ _______________________________________________ _______________________________________________ _______________________

4. FILL IN THE MISSING WORDS BELOW:

laws, limited, quality, demand, goods, supply, motivated, services, allocated,

standard, prices, competition, vital, range, needs

In market economies resources are ________________ automatically by the forces of __________________and

_____________________. Competition leads to lower _______________, a wider ______________________of goods, goods and services are better ____________.The role of government is _____________: to pass ________, to provide certain ___________and ______________and ensure fair ______________. In planned economies government has a ______________role. Production is for ________________rather than for profit, people are less _______________to work efficiently and the _________

of living is lower.

5. 5.

► http://www.youtube.com/watch?v=BfoQ4S_QOPQ&feature=related

► Explain the following words:Explain the following words:

1. Traditional economy =1. Traditional economy =

2. 2. ManorialismManorialism = =

3. Mercantilism =3. Mercantilism =

4. Laissez faire capitalism = 4. Laissez faire capitalism =

6. Command economy = 6. Command economy =