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ECONOMIC SYSTEMS

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michelle ashmore

on 9 September 2016

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Transcript of ECONOMIC SYSTEMS

ECONOMIC SYSTEMS
now let's look at which of the goals are important to the 3 Economic Systems...
COMMAND/CENTRALLY PLANNED
How does it answer the 3 basic Questions?
MIXED
How does it answer the 3 basic questions?
FREE MARKET
- laissez faire (the gov't should not intervene)

- Adam Smith (the invisible hand)
the marketplace will run itself because of competition and self-interest

Every nation when making decisions
(because of
scarcity
)
has to answer
the
3 basic questions

when trying to figure out whether to trade (
comparative advantage
) and how to use resources
3 basic Economic Questions:

WHAT to produce?
HOW to produce?
FOR WHOM to produce?
- socialist/
communist
nations
- Karl Marx (
Communist Manifesto
)
The Government makes all decisions... TOTAL GOV'T CONTROL
Principles the
COMMAND system upholds:
Competition: battle to be the best/strongest/most successful

Government regulation: policies implemented by the gov't to control/maintain practices
why regulate?

to keep any one group from getting too much power

to ensure price, quantity, and quality of products
- nations must have some gov't intervention (healthcare, transportation, education)

- John Maynard Keynes
SOME GOVERNMENT CONTROL

individuals, business, and govt all involved in answering
all systems today are actually Mixed...
but some have more gov't control than others!
Principles the MIXED
system upholds:
profit motive: goal is to make $

Government Regulation

Competition
Voluntary exchange

Self Interest: do what is best to benefit you

Consumer sovereignty: people control what is produced, and how much they are willing to pay

Private Ownership: ppl, business, and govt can all own and control property (factors of production)
How does it answer the 3 basic questions?
whatever consumer/producer wants...
NO GOV'T CONTROL
Principles the FREE MARKET system upholds:
AKA: Capitalism
voluntary exchange

profit motive

competition

self-interest

consumer sovereignty

private ownership
Do you remember
the 7 Economic Goals??

Freedom
Efficiency
Full Employment
Equity
Security
Stability
Growth
Traditional

- immune to change
- follow customs and tradition
- everyone has a role/job
how does it answer the 3 basic questions?
how it has always been done (custom)
Principles the
TRADITIONAL system upholds:
voluntary exchange: free trade between people to get wants/needs met (based on mutual satisfaction)

Economic Systems Review!!
In which economic system do only individuals answer the three economic questions?
A)traditional economy
B)command economy
C)market economy
D)mixed economy
(formative assessment)
In a command economy, the means of production are owned by
A)individuals
B)family groups
C)religious leaders
D)the government
Full transcript