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Economics System and the Three Basic Questions

Global Economics 101
by

Daniel Kim

on 17 March 2016

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Transcript of Economics System and the Three Basic Questions

Three Basic Questions and the Types of Economics Systems Economic Systems Every nation needs to figure out how to satisfy its people's wants and needs. This is called an Economic System.

To solve this problem, nations will ask themselves
three basic questions Economic Systems What should be produced? How should it be produced? For whom is it being produced 3 Because we live in a world of limited resources, nations must have an understanding of and Also what a nation produces depends on its natural resources or Land. Some nations have more valuable natural resources than others! No nation can produce every good it needs or wants! If more of one item is produced, then less of something else will be produced Trade-offs Scarcity Questions Once we decide what to produce, we need to figure out how to produce it Nations need to decide on the best combination of goods and services to create! They need to maximize the quantity/quality for the lowest possible cost Finally once the goods are services are produced, a nation must decide how to Distribute them Usually in The United States anyone willing and able to pay the price of a good or service will receive them Types of Economic Systems There are Four basic types of economic systems:

Traditional
Command
Market
Mixed A Traditional Economy answers the Three basic questions based on,
"The way they have always been done." In a Command System, individuals have little influence or choice in economic decisions

Government Leaders make decisions as opposed to tradition Things that are chosen for you: the end. Most countries in the world have a Mixed Economy A Market, is the process of freely exchanging goods and services between buyers and sellers For the most part, it is the individuals who answer the three basic questions and thus own the Factors of Production Traditional System In this economic system, practices are passed down from generation to generation. If your father was a fisherman, you would take up his craft Advantages Disadvantages You know what is expected of you Family and community ties are usually very strong No social or economic movement Change is discouraged and even punished Not a ton of variation in consumer goods Methods of production are archaic and inefficient Command System What product or service is produced
How they are distributed
What your career is and your pay Advantages Disadvantages None Complete lack of Incentives Typically comes with oppression and tyranny Lack of consumer choices and freedoms Market System Market Economy Command Economy Polar Opposites Also known as Capitalism, in a Market Economy, individuals make their economic decisions for their best interests Land
Labor
Capital
Entrepreneurship Vocab Time! There are all types of markets and they are not necessarily a specific place
Global Oil Market
Farmer's Market
Best Buy Government Businesses Individuals People pay for goods and services they get from businesses Businesses give people money for working for them Businesses give people goods and services People give businesses their Labor and Entrepreneurship Businesses pay taxes Governments give incentives Individuals pay taxes Government gives benefits to people Mixed System Command System + Market System = Mixed System While private ownership and individual decisions are protected, governments intervene to regulate the markets Laws Protecting
Private property
Environmental Safety
Worker's Rights
Monopoly Prevention Mr. Kim's Advanced Global Economics
Full transcript