Economic Systems (Lesson 1)

1. Economic Systems (Lesson 1) Aim: Which economic system best answers the three questions? (What to produce?, How to produce? and Who gets it?)

2. Economic System Economic System-The institutional framework of formal and informal rules that a society uses to determine what to produce, how to produce, and how to distribute goods and services (who gets it?).

3. 3 Basic Economic Questions ●What–goods & services should be produced? “What to produce?” is an allocation question. All economic systems must determine how to allocate productive resources in the form of land (natural resources/raw materials), labor (work for which we earn pay) and capital (human - education & job training) (physical – buildings, equipment & tools).

4. 3 Basic Economic Questions ●How – should goods & services be produced? “How to produce?” is an efficiency question. All economic systems must determine how goods and services will be produced.

5. 3 Basic Economic Questions ●Who – consumes the goods & services produced in society? “For whom?” is a public choice question. All economic systems must determine which goods and services will be available for public use and which for private use.

6. Command Economy In theory, a command economy is an economic system based on: (1) A classless society (2) Common ownership of resources (3) No government (4) Income distributed according to needs. As practiced in the real world, communism is an economic system based on: (1) Government ownership--government ownership and control of most resources and the means of production (2) Central planning--excruciatingly detailed and comprehensive resource allocation decision making by the central government. Under real world communism, governments undertake the vast majority of the resource allocation decisions, with few decisions undertaken by individuals. The former Soviet Union was the primary example of real world communism before it disbanded in the late 1980s. China, Cuba, and a scattering of African nations continue to operate under various forms of communism.

7. Mixed Economy In theory, a mixed economy is the transition between capitalism and a command economy and is based on: (1) Government ownership of resources and the means of production (2) Worker control of government (3) Income distributed according to needs. As practiced in the real world, socialism is an economic system based on (1) nationalized industries--government ownership and control of key industries (2) Central planning--relatively detailed, but not comprehensive, resource allocation decision making by the central government. Under real world socialism, governments exert extensive control over resource allocation decisions, primarily involving key industries such as transportation, energy production, communication, and health care. While Sweden exemplifies modern socialism, several European nations have practiced varying forms of socialism over the decades.

8. Capitalism Capitalism is undoubtedly at the top of any list of economic systems operating in the modern World. This system is based on: (1) Private property--private ownership of resources and the means of production (2) Individual liberty--relative freedom on the part of the resource owners to use their resources as they see fit. (3) Competitive markets--a system of relatively competitive markets. Under capitalism, governments establish the basic rules of the game and are responsible for the production of public goods, but the vast majority of resource allocation decisions are undertaken by individuals, as either consumers or producers. The United States is one of the more noted examples of capitalism. However, most modern industrialized economies of Europe, Asia, North America, and South America operate under capitalism.

9. Homework • Read the documents on different economic systems and complete the questions on the handout.

10. Economics Systems Simulation Game. (Lesson 2) By Joseph Johnson

11. AIM: Which economic system best answers the three questions? (What to produce?, How to produce it?, Who gets it?)

12. How to play • Students will be separated into four equal groups. • Students will be their own business and produce products based on their company food, housing, car maker, or energy and communication. • Students will draw on a blank sheet of paper products that they want to sell to other students based on your company. • Teacher will also be a consumer and pay students for products based off of need. • Students need all products to survive in the real world and will purchase goods from other students to live and sell their products to others to make a profit. • Students will start with 3 pieces of paper to get more they must buy another piece to create more products costing 1 M&M (price may change due to supply and demand)

13. The Rules • Students must participate in the economic system through buying and selling. • Students may not eat profits!!!!!!!!! Until the end of the class that day • Students if they choose may work with one other person to create a product. In the beginning • Students at the end of each turn must pay taxes set by the government (the teacher) • Drawings once sold cannot be reused they are consumed Hint - (products do not have to be grade A artwork but must appeal to students)

14. First Society • In society students can sell products for whatever price they choose to sell it at. • At the end of each round 1 M&M will be taken as tax • Students are free in this type of economy to make his or her own decisions.

15. Second Society • The classroom rules have now been altered Universal Health care is now in effect students in the energy and communication business now must pay taxes with half of their profit on any given drawing of energy. • This will help the government provide healthcare and services to those that are poor and have less M&M . • The tax is still the same.

16. Third Society • The classroom rules have changed slightly all students are now equal and will have the same income and the same amount of M&M’s the wealth will be redistributed. • All drawings will be given to the government the pay will be 3 M&M’s for all those wearing red and 2 for those that do not conform and are wearing a different color. • Students must all make and color drawings with only pencils to conform to the same and equal products nothing is different. • The tax is still the same.

17. END OF SIMULATIONS Discussion After the simulation

18. Questions • Compared to other students, how did you feel at the start of the game? • What happened to your amount of candy at the end of the game? How did this make you feel? • Do you think this game was fair? • What could I as the government of done to make the game fairer? • Which economic system was more appealing to you based on your economic position?

19. HOMEWORK • Students for homework write a two page reflection paper on the game, which is to include the information of (What did you like about the game?, What did you not like about the game?, Which economic system did you like the most?, and which economic system did you like the lease?). Include 3 examples from the lesson to support your reflection

20. Economic Systems (Lesson 3)

21. Do Now • Aim: Which economic system best meets the three basic economic questions?

22. Meeting of the Minds • Directions: • 1. Each person has been assigned an Economic System. • 2. Your job is to convince the other members in the group that your system is the best. • 3. You must provide evidence from the documents provided.