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Copy of Market Economies, Mixed Economies, & Principles of Market Economies

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Daniel Calvo Rojas

on 15 April 2013

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Transcript of Copy of Market Economies, Mixed Economies, & Principles of Market Economies

Free Market Economies Last Day Free Market Economies Right side of spectrum Economic Systems Last Day The way a society organizes the production, distribution and consumption of goods & services Economic Continuum Market Economy Mixed Economy Planned Economy Public vs Private Public Private Part of the economy owned and controlled by businesses and individuals Part of the economy owned and controlled by government and paid for taxes Last Day Last Day Scarcity solved by individual choices
Private businesses own and manage resources
Sell to consumers who make decisions on what to buy
Little government involvement
Businesses succeed if they produce what consumers want Characteristics of Market Economy Resources privately owned
Individuals make decisions on how to best use resources
Individual consumers drive economic decision making by choosing what to buy A Look at the USA Economy The U.S.A Economy Founding Principle: "Life, Liberty and the Pursuit of Happiness Individualism Idea that what's best for each individual person individually adds up to what's best for society
Values individual creativity & independence Individualism & the U.S.A U.S. generally values individual economic decision making, with little government involvement How has America's history influenced the founding principle of "life, liberty and the pursuit of happiness?"

Or the importance of individualism? American Revolution American Revolution 1776-1783 Vs Britain In Debt The Seven Years War had created a large debt for the British government
Decided to heavily tax the Americans Colonies Taxation of the 13 Colonies Britain decided to station troops in the 13 Colonies and had the Americans pay for them by increasing their taxes Townshend Acts Placed taxes on essential goods like paper, tea and glass Response Boston Tea Party Responded by dumping 10,000 pounds of tea in the Boston Harbor 1776 Declaration of Independence Announced that the Americans were no longer apart of the British Empire How did this event influence American economics? Shifting Left/Right Shift Left/Right Position of the U.S. on the economic spectrum shifts right and left depending on the political party that forms the government Example: Shift Left Franklin Roosevelt 1933-1944 Became president in 1934 during Great Depression
Millions out of work
How would you respond to such a situation? Example: Shift Left Continued Franklin Roosevelt's New Deal Increased public spending
Pensions for seniors.
Funds to support farmers.
Corporations funded and run by the government. Created jobs and built projects to strengthen the economy, such as dams and roads Video How does this relate to today? Distribution of Wealth in U.S. Today What do you think about this video? Example: Shift Right Ronald Reagan 1980-1988 Wanted less government involvement Ronald Reagan President in 1980
Reduced government spending
Reduced government regulation of corporations (ex: environmental standards) Reagan Cartoon What Else Might Be A Shift To The Right? What Else Might Be A Shift To the Left? What do you think of the U.S. Economic System?

Thoughts? Opinions? Newsroom Free Market Economy Democrats Vs. Republicans America Mixed Market Economy Mixed Market Economies & Public Good Previous Class The Economic Continuum Mixed Economy Planned Economy Free Market Economy Capitalism Communism What are some characteristics of a mixed economy? Government Involvement No Government Involvement Types of Economic Systems Mixed Market Economies Combines private ownership & government control
Level of government involvement fluctuates depending on what political party is in power Characteristics Of A Mixed Economy Some resources are publicly owned and some are privately owned
Individuals and government both make decisions about what to produce
Individual consumers and government influence economic decision making What are some benefits of a mixed economy? What are some cons of a mixed economy? Canada's Economy Founding Principle: "Peace, order and good government" Cooperation Belief that individuals must consider each other and set aside their individual interests to achieve what's best for society Shift Left A shift on the economic continuum towards more government involvement in the economy.

A shift left is usually described as a more liberal position. Shift Right A shift on the economic continuum towards less government involvement in the economy.

A shift right is usually described as taking a more conservative position. Founding Principle: "peace, order and good government" Cooperation Connects to an agreement between Francophones and Anglophones that estblished Canada Founding Principle Cooperation Values Equity Responding to others in a way that recognizes their needs and circumstances Idea of cooperation affects Canada's economic system.

Ex: Government plays an important role in the economy, making decisions on behalf of everyone. Last Day Shift Left A shift on the economic continuum towards more government involvement in the economy.

A shift left is usually described as taking a more liberal position. Last Day Shift Right A shift on the economic continuum towards less government involvement in the economy.

A shift right is usually described as taking a more conservative position. Shift Left In Canada Lester Pearson Lester Pearson 1963-1968 PM in 1963
Leader of Liberal party
Formed minority with New Democratic Party
Larger role of government in economy
Publically funded health care
Pensions for senior citizents Shift Right In Canada Brian Mulroney Brian Mulrony 1984-1993 Became PM in 1984.
Majority Progressive Conservative Government
Took steps to reduce government involvement What could he do to reduce it? Brian Mulroney Reduced government Involvement Cuts to spending.
Privatizing government-owned corporations, called Crown Corporations.
The North American Free Trade Agreement (NAFTA) with the U.S.A. and Mexico, which increased the influence of the market in shaping Canada's Economy. What could cuts to spending include? Crown Corporations Is a company owned by Canada's government to provide products and services to Canadians. Examples? Reasons For Crown Corporations To provide essential services.
To promote economic development.
To support Candian culture and identity. Benefits? Air Canada Originally Trans-Canada Airlines
Established by Canadian Parliament in 1935 and owned and managed by the Federal government
Privatized (sold to private investors) in 1988 Petro-Canada Established by Canada's Parliament in 1975
Purpose was to compete with foreign-owned companies in developing Canada's oil and gas resources
Today owned by private investors CBC/Radio-Canada Canada's public broadcaster
Both French & English networks
Created to promote bilingualism and promote Canadian Culture Why do we need CBC/Radio-Canada? Public Good Def: what's best for society as a whole How does Canada & the U.S.A differ in how they answer the question of public good? How Do Market Economies Work? Mixed & Free Market Are different, but similar.

Individual choices of consumers are an important economic force in both systems Mixed & Free Markets Free Market Economies Mixed Market Economies Drive all economic decision making Drive a lot of economic decision making Supply & Demand Game! Need the class divided into 2 groups Buyers Sellers Will stay the same for game At the beginning of each round, each buyer and seller will get a card with a value on it. Buyers and sellers will then make transactions. Purpose of the game is to make the most money $$$$ Buyers Card will have a maximum bid price on it. This means this is the maximum amount you can pay for in a transaction. Surplus value is the difference between the maximum bid price and transaction price. You want to make the most profit! Buyer Example I have a maximum bid price of $8 I agree to a transaction for $5 with a seller My surplus value is $3 Record your transactions on a piece of paper Sellers Cards will have a minimum offer price. This is the lowest price that a transaction can take place for. Sellers want to sell above their minimum offer price to create the biggest surplus value (profit) Seller Example I have a minimum offer price of $3 I agree to a transaction for $5 with a buyer My surplus value is $2 Record 1-Supply & Demand Other Rules Results Of The Game! Selfish, rational maximizers, acting without government intervention or regulation, arrived at an efficient price. An efficient price is one that creates no shortages and no surpluses.

So this is a demonstration of Adam Smith’s concept of the Invisible Hand which says that selfishness serves society. The players in the game acted based on their self-interest and the price and quantity that resulted were the best that could exist. What do you know about supply & demand? Key Terms Consumers: those who use products and services

Demand: the wants and needs of consumers for products and services Key Terms Producers: those who create products and services

Supply: the products and services created by producers Supply & Demand Characteristics S & D connect through a cause-and-effect relationship related to price.
S & D affect quality of life because they affect the prices of products we buy, the availability of products, & jobs connected to creating products. Why do prices vary? Between stores?
Between provinces?
Between countries? What factors influence the availability of products? Supply & Demand: Equilibrium Supply of a product can meet the demand for a product at a specific price Supply
Producers Demand
Consumers Price Supply & Demand: Equilibrium Price Quantity Demand Supply & Demand: Demand Goes Up? What happens to supply and price? Supply & Demand: Demand Goes Up Demand
Consumers Supply
Producers Price When demand goes up, it means more consumers are buying the product As consumers buy up the product, the availability of the product drops This drives up the price of the product, because the consumers compete for the limited supply available What products have created such a high demand? Iphone 5 - New York Supply & Demand: Price Goes Up What happens to demand & supply? Supply & Demand: Price Goes Up Price Demand
Consumers Supply
Producers As price increases, fewer people can afford to buy it Drives Demand Down Fewer consumers buy the product, so the availability goes up What are some examples of when a price goes up? Supply & Demand: Supply Goes Up What will happen to price and demand? Supply & Demand: Supply Goes Up Supply
Producers Price Demand
Consumers More of the product is available If there are more products available than consumers want to buy, producers cut prices to encourage consumers to buy more The lower price encourages consumers to buy more, so demand for the product goes up What would be an example of supply going up? How Do Market Economies Work? 2-Competition What Is Competition? Where can we see it in the world? Where do we see competition in economics? Competition In economics, rivalry among producers to sell products to consumers What are some factors that you consider when choosing a certain product over another? Factors That Affect Competition Price
Ex: Nike vs. Adidas Availability
Values of consumers
Decisions by gov to become in decisions about supply and demand Factors That Affect Competition How Do These Two Businesses Compare? Vs. What are the differences in their businesses? How Do These Two Businesses Compare? Vs. Tim Horton's In America Canadian Companies U.S.A. Target Coming To Canada U.S.A Companies Canada What are the pros/cons of foreign companies coming to Canada? Is anyone loyal to a specific company? Why? What challenges does Tim Horton's face in entering the U.S. Market?

What challenges does Dunkin Donuts face in entering the Canadian Market? What are the positive and negative components of competition? Where have you heard of the term monopoly? What is it? Monopoly It is when one producer controls all supply of a product or service.

Opposite of competition. What are some examples of a monopoly? Are they always bad? Why They Are Created? Companies may attempt to create a monopoly to gain control of the market Government Companies Governments sometimes create monopolies as a way to provide essential services that require expensive infrastructure, such as water lines or sewer lines. Government Example: Canadian Wheat Board Markets wheat in western Canada on behalf of all wheat growers.
Sets the price of wheat, not set by competition among growers or their customers.
Meant to protect wheat growers from low market prices. Corporate Monopolies Often governments intervene to prevent monopolies and restore competition among producers. Ex: U.S. government was forced to adjust its software product windows to allow compatibility with browsers other than its own Internet Explorer. John D. Rockefeller & Standard Oil Should monopolies be allowed? Why else might governments get involved in free market economies? May intervene if they feel consumers are not being treated fairly. Ex: B.C. government started its own auto insurance program because it believed private insurers were making auto insurance too expensive. Ford Pinto For Next Class!

Think about what factors make an add successful. There will be 5 rounds.
After each round sellers will come up to me and tell me all of your transactions prices
At the beginning of each round you will get a new card
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