1 / 11

Chapter 2

Chapter 2. An Introduction to Economic Systems. System Structure. Command Economy Follows a central plan Uses laws to dictate economy Market Economy No centralized plan Economy based on millions of independent decisions. Market Economic System. Essential Features:

carina
Télécharger la présentation

Chapter 2

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 2 An Introduction to Economic Systems

  2. System Structure • Command Economy • Follows a central plan • Uses laws to dictate economy • Market Economy • No centralized plan • Economy based on millions of independent decisions

  3. Market Economic System • Essential Features: • Private ownership of most businesses • Voluntary market exchanges • Allow for incentives • Relative Price • Price of one good in terms of another good

  4. Opportunity Costs • Purchase decisions are made by weighing opportunity costs. • Relative prices can change • Example: • Concert Tickets or CD’s

  5. Legal System • Creation of Private Property Rights with ownership structures • Ex: Proprietorships, partnerships, and corporations. • Laws must be accepted, obeyed, and understood. • Individuals must trust each other

  6. What does an Economic System Do? • Coordinates • Methods of Production • Quantities • Distribution • Stability • Growth

  7. Specialization of Labor • Allows to become skilled at particular tasks. • Reduces time wasted • Mental shift • Switching materials • Increased innovation • Promotes trade • However, does lead to worker discontent

  8. Price System - Supply • Quantity Supplied • Quantity a producer plans to sell at each possible price. • Supply Price • Minimum price a seller will accept for one additional unit of a good or service. • Law of Supply • Quantity supplied is positively related to its price.

  9. Price System - Demand • Quantity Demand • Quantity a consumer is willing to buy at each price level. • Demand Price • Maximum price anyone will pay for a good. • Law of Demand • Quantity demanded is negatively related to its price.

  10. Supply and Demand • Market controlled by the plans of producers and consumers • Excess demand and excess supply counteract to reach equilibrium • Quantity demanded = quantity supplied

  11. Equilibrium • The essence of market coordination • Command economy uses laws to produce certain goods and services • Market Economy uses laws to establish rules of behavior.

More Related