The 4 Main Economic Systems:
Capitalism, Communism, Socialism and Traditional Economy
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ECONOMIC SYSTEMS
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Visual L – Which economic system is represented below?
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Where do you get ready for school in the morning?
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What are the characteristics of a traditional economy?
- High infant mortality rate
- Low life expectancy
- Low literacy rates
- Low level of technology use
- Relies on substance farming (growing your own food to eat)
- Resources are allocated by inheritance based on traditions
- Has a strong social network
- Usually used in small communities for survival purposes
- Used in Guatemala
Making Predictions: Which economic system is represented?
Where do you go for milk?
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What are the Characteristics of a Communism?
- Government controls all major sectors of the economy, makes all decisions about the use & distribution of income
- No consumer goods or choices
- Medium-High levels of technology
- Government spending on military & technology
- Medium-Low level of infant mortality rates
- Used in North Korea, Cuba, former Soviet Union (Russia) and previously used in China
What is Socialism?
a combination of communism and capitalism
WHAT ARE THE CHARACTERISTICS OF CAPITALISM?
1. People have the right to choose jobs and professions.
2. People have the right to own private property.
3. There is limited government involvement in the economy.
4. Competition among businesses drives the marketplace.
5. The desire to make a profit, drives individuals.
6. There is freedom of choice for consumers to buy what they want, and where they want.
Other Characteristics of Capitalism?
- High technology use
- High life expectancy rates
- High literacy rates
- Low infant mortality rates
- More consumer products like cars, TVs, and computers
- Indoor plumbing and running water
WHAT ARE THE FOUR ECONOMIC QUESTIONS?
The basic four economic questions are answered by the forces of the marketplace
1. What is produced?
2. How goods are produced?
3. How much to produce?
4. How much to sell?
Determined by demand’s of consumers and driven by competition
What are the four factors of production?
The four factors of production (land, labor, capital, and entrepreneurship) are privately owned in a market economy. In order for the free-enterprise system to work, all four factors of production must be available.
1. Land - land and everything else including raw materials, or natural resources
2. Labor – workers & their efforts to produce goods or provide services
3. Capital - all the resources used to produce a product, such as tools, machinery, factories, and most important money
4. Entrepreneurship – mean a person or company who skillfully combines them to produce useful products; risk-takers who supply the money to produce a product. The income for the entrepreneur comes in the form of profit.
Trip to the Mall
When looking for a pair of shoes, why would you go to more than one store or place?
Why are the same shoes priced differently at different stores?