1 / 18

Economic Systems and Decision Making

Economic Systems and Decision Making. Chapter 2 January 16 and 17, 2014 . 1. Traditional Economy Nearly all economic activity stems from ritual, habit, or custom Individuals are not free to make decisions based on what they want or would like to have

lorand
Télécharger la présentation

Economic Systems and Decision Making

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. Economic Systems and Decision Making Chapter 2 January 16 and 17, 2014

  2. 1. Traditional Economy • Nearly all economic activity stems from ritual, habit, or custom • Individuals are not free to make decisions based on what they want or would like to have • Defined by customs of elders and ancestors • Ex. Inuit • Page 34 for you 32 for me Economic Systems

  3. Strengths • All questions are already answered • Everyone know what roles to play and what to produce • Weaknesses • Discourage new ideas • Even punishes • Lack of progress • Leads to lower standard of living Traditional Economy

  4. Central authority makes all the decisions for the WHAT, HOW, and WHOM questions • Decisions made at the top • State Planning Committee in the former Soviet Union • Decided needs, goals, set production quotas • Redirect resources and money Command Economy

  5. Strengths • Can change direction of country on a short time frame • Weaknesses • Not designed to meet the needs and wants of individuals • People often have to sacrifice for the good of the state • Lack incentives to work hard • Everyone gets paid the same • Seldom lose job • Requires large decision making bureaucracy • People can’t get ahead Command Economy

  6. People and firms act in their own best interest to answer the WHAT, HOW, and WHOM questions • Allows buyers and sellers to have control • People’s decisions act as votes Market Economy

  7. Strengths • Can adjust to change over time • More difficult to fail • Freedom for everyone involved • Small degree of government involvement • Decision making in decentralized • Variety of goods • High degree of consumer satisfaction Market Economy

  8. Weaknesses • Rewards go to most productive • Sometimes do not work as they should • 3 Conditions • 1. Competition • 2. Resources must be reasonably free to move from one activity to another • 3. Access to information so that alternatives can be known and wise choices can be made Market Economy

  9. Typically a market economy • Private citizens own the factors of production • Thrives on competition • best product and lowest prices • Free Enterprise Capitolism

  10. 1. Economic Freedom • Choose occupation • Employer, Where, When • Lots of options • Room to move and grow • 2. Voluntary Exchange • Freely engaging in market transactions • Transactions benefit both the buyer and the seller Characteristics

  11. 3. Private Property • People have a right and privilege to control their possessions as they wish • Includes tangible items and intangible • As long as they do not interfere with the rights of others • Gives people incentive to work, save, and invest • 4. Profit Motive • Freedom to risk savings on a business venture Characteristics

  12. One of the most important people in the economy • Organizes and manages land, labor, and capital • Seek a profit • Start up new businesses • Many fail • When they are successful, everyone benefits • Can lead to new products, greater competition, more production, higher quality, and lower prices for consumers The Role of the Entrepreneur

  13. Thought of as having power in the economy because they determine which products are ultimately produced • Consumer sovereignty • Ruler of the market • “Customer is always right” • Want constant change The Role of the Consumer

  14. National, state and local level • Reflects the desires, goals, and aspirations of citizens • Become involved because Americans want it to • Protector, provider and consumer, regulator, and promoter of national goals The Role of Government

  15. Enforces laws • Against false and misleading advertising • Impure food and drugs • Environmental hazards • Unsafe automobiles • Discrimination • Contracts Protector

  16. National Level • Defense • State Level • Education • Public Welfare • Local • Parks, mass transit, libraries Provider and Consumer

  17. Oversees interstate commerce • Communications • Granting of buildings and zoning permits • Preserving competition in the market Regulator

  18. Reflects the will of the majority of the people • Unites States is said to have a Mixed Economy or a Modified Private Enterprise Economy • Carry on economic affairs freely but are subject to some relegations and government interventions Promoter of National Goals

More Related