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Economic Systems

An overview of Chapter 2
by

Brad Hayes

on 12 January 2017

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Transcript of Economic Systems

protector--
government may pass and enforce laws to prevent the abuse of consumers and workers.
Populations tend to increase and existing populations tend to want more goods and services. The economy must keep up.
GOAL #7—ECONOMIC GROWTH
The government may have to play a role in stopping inflation from growing too rapidly
GOAL #6—PRICE STABILITY
Consumer sovereignty
describes the role of the consumer as
ruler
of the market.
The role of the Entrepreneur
use land, capital, and labor to make a profit.
Characteristics of Free Enterprise or Capitalism
Make policies which create, not limit jobs available.
GOAL #5—FULL EMPLOYMENT
Government may play a role in insuring
your money, helping out if you
are sick or disabled, and protecting you from
misinformation.

Ex.—FDIC, Disability, Truth in Lending Laws
GOAL #4—ECONOMIC SECURITY
Resources are being used wisely and the costs of using are less than the benefits
GOAL #2—ECONOMIC EFFICIENCY
People make their own economic decisions
GOAL #1—ECONOMIC FREEDOM
All economies have basic goals :
We measure and monitor our progress towards these goals to see where we stand.
EVALUATING ECONOMIC PERFORMANCE
Individual freedom
Able to adjust to change
Lack of government interference
Decentralized decision making
Variety of goods and services
Consumer satisfaction
ADVANTAGES
/
DISADVANTAGES
of Market Economies
Decisions about production and distribution are made mostly by individuals and companies in the economy.
Market Economies
Capable of dramatic change over short period of time
Many basic health, education services available at little cost
Everyone is given something to do
ADVANTAGES
/
DISADVANTAGES
of Command Economies
A Command economy is one in which decisions about production, distribution and consumption are made mostly by the government.
Command Economies
Stable, predictable lifestyle
Roles are set forth for the individual
ADVANTAGES
/
DISADVANTAGES

OF TRADITIONAL ECONOMIES
BASIC ECONOMIC SYSTEMS
CHAPTER 2
Government plays a role in stopping economic discrimination based on gender, race, religion, etc.
GOAL #3—ECONOMIC EQUITY
A Traditional economy is one based on self-sufficiency and barter.
Barter is another word for trade.
TRADITIONAL ECONOMIES
Examples of Command Economies
Traditional economies can be found
on any continent in rural, tribal communities
EXAMPLES OF
TRADITIONAL ECONOMIES
Examples of Market Economies
THE ROLE OF THE CONSUMER
THE ROLE OF GOVERNMENT
Rewards only productive resources, not people too old, sick, lazy to work
Must guard against market failures
Workers and businesses can face uncertainty
Does not meet the needs/wants of consumers
Lacks incentives to work harder
Requires a large bureaucracy, which can be inefficient
Not flexible
No room for individuality
Discourages new ideas and new ways of doing things
Lack of Progress
Low Standard of Living
Who you are, your status or your family's status determines what job you will do and how you will live.
People will do things as they have always been done
Traditional economies are organized by status and custom
There is no private ownership of anything.
Command economies are organized by rules, and those rules are decided upon by a centralized authority.
People do things for the good of all society.
For example, the government decides what goods will be produced and how much will be made.
Market economies are organized around
voluntary exchange and competition.
Companies produce goods based on what they think they can sell.
People do things for self interest--potential for benefits--a job with the salary that allows you to live the lifestyle you want.
The flexibility of the American economic system allows choices and compromises.
When goals are at odds, people must compare costs to benefits before resolving the conflict.
The search for profits leads to:
new products, greater competition, more production, higher quality, and lower prices for consumers.
When an entrepreneur is successful, everybody benefits.
Consumers in the American economy express their wants in the form of purchases in the marketplace.
The dollars they spend are the “votes” used to select the most popular products.
promoter--
of national goals In the United States, achieving economic equity and security has resulted in a
mixed economy, or modified private enterprise economy.
regulator--
sets up rules to preserve competition and acts as a
referee
to make sure the rules are followed.
provider--
things like police, fire departments, parks, education and welfare.
How resources (land, labor, and capital)
are controlled by a country
How these factors of production are distributed to the population of a country.
E C O N O M I C S Y S T E M
Usually, 5.0% and below is considered “FULL EMPLOYMENT”
Subtypes: Communism
Socialism
Totalitarian Dictatorship
SUBTYPES:
Capitalism
Free Enterprise
Mixed Market Economy
Watch until 3:00
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CAPITALISM/FREE ENTERPRISE/MARKET/MIXED MARKET
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