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Review with Your Partners

This text discusses the concept of economic systems, including the difference between command and market economies. It also explores the advantages and disadvantages of each system and highlights the concept of scarcity. The text concludes by examining mixed and traditional economies and their role in the global economy.

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Review with Your Partners

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  1. Review with Your Partners • What are goods and services? • What are productive resources? • Describe costs vs. benefits? • What is the difference between trade-offs and opportunity costs? • What is scarcity? • Describe the difference between Capitalism and Communism. • What is the fundamental economic problem? • Name 10 Lawndale teachers.

  2. Economic Systems

  3. Economic Systems Economic System: The way a nation organizes, manages, and controls resources (factors of production) and distributes wealth/materials among the population. An economic system is defined by how these factors of production are controlled and distributed

  4. Economic Systems: a Spectrum

  5. Economic Systems Command/Centrally Planned Economy Market Economy Government is not involved. Resources are distributed and shared based on “supply and demand.” VS. Government manages all or most resources and industries within the nation

  6. Command/Centrally Planned Economy TWO types: • Communism: Government owns all factors of production and decides how resources will be used. 2. Socialism: Government owns and controls critical industries, but individuals can run non-critical businesses.

  7. Communism • Government controls all factors of production • Determines who gets capital, how it is used, and for which industries. • Gov’t owns/controls all resources (i.e. labor) • Makes decisions to benefit most people • No individual ownership; decisions benefit all people, not individuals.

  8. North Korea and South Korea at Night North Korea's GDP is $40 Billion South Korea's GDP is $1.3 Trillion (32 times greater).

  9. Socialism • Gov’t controls critical industries, but individuals can run non-critical businesses. • Individuals can use skills/talents to make a living in non-critical industries • Unequal distribution of goods—pay is according to work done

  10. Market Economy/Capitalism • Gov’t NOT involved; private firms account for all production. • Private ownership of everything • Resources distributed based on supply and demand • Goods distributed unevenly

  11. Pros/Advantages Command Economy Market Economy People get what they deserve Those who study or work hard earn more than those who don’t • Wealth/output equally shared among all members of society

  12. Cons/Disadvantages Command Economy Market Economy GREED Inequality Some have little resources to sell • Everyone gets the same amount of wealth regardless of how hard they worked or studies • Leads to low motivation • Resources wasted

  13. Your Turn… In groups of 3-4, discuss the following scenarios from the perspective of market, communist, or socialist societies. Then, vote on which system is the most effective for each scenario.

  14. Scenario 1 A man who lives in the woods is cold during the winter time, so he goes into his backyard to chop down a tree for firewood. Then, he sells it to his neighbors. How would the government react?

  15. Scenario 2 A farmer in this society produces twenty barrels of apples. How is the harvest used/allocated?

  16. Scenario 3 An extremely talented artist wishes to make paintings and sell them to earn a living. What can the girl do?

  17. Scenario 4 A boy breaks his arm while playing on the playground and he needs to get surgery. How will the boy get medical treatment?

  18. Scenario 5 A medical school is accepting applications for the 2014-2015 school year. How does it determine who is admitted?

  19. Scenario 6 The nation is about to go to war. How does it prepare its military, supplies, and technology?

  20. Mixed Economies • Has features of both command and market economies • Most nations of the world have mixed economic systems. • People have the freedom to pursue their goals • Gov’t manages and regulates business: • imposes laws for environment, protects wildlife, ensures products are safe, etc. • Gov’t provides essential services: • Roads, police force, military, healthcare, currency, postal service, etc.

  21. Traditional Economies – -Based on tradition and culture -Old, ancient economies -Do not exist in out global economy today

  22. North Korea and South Korea at Night North Korea's GDP is $40 Billion South Korea's GDP is $1.3 Trillion (32 times greater).

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