Splash Screen

1. Splash Screen

2. Chapter Introduction Section 1:Economic Systems Section 2:Characteristics of the American Economy Section 3:The Goals of the Nation Section 4:Socialism and Capitalism Visual Summary Chapter Menu

3. Every society has an economic system to allocate goods and services. Chapter Intro 1

4. As an American, you have many economic choices available to you. Not all nations offer their citizens the same economic choices that most Americans enjoy. In this chapter, read to learn how the American economy is different from the economies of some other countries. Chapter Intro 2

5. Chapter Preview-End

6. Section Preview In this section, you will learn about the four basic types of economic systems and how each one answers the three basic questions of what, how, and for whom to produce. Section 1-Main Idea

7. Content Vocabulary • economic system • traditional economy • command economy • market economy • market • circular flow of income and output • mixed economy Section 1-Key Terms

8. Academic Vocabulary • available • distribute • incentive Section 1-Key Terms

9. A B C Do you know much about the different economic systems that exist? A.A good amount of information B.A moderate amount of information C.Not a lot of information Section 1-Polling Question

10. Three Basic Questions All economic systems face the same basic questions: What should be produced? How should it be produced? For whom should it be produced? Section 1

11. Three Basic Questions (cont.) • The way a nation uses its resources to satisfy its people’s needs and wants is called an economic system. Section 1

12. Three Basic Questions (cont.) • An economic system must ask three basic questions: • What goods and services should be produced? • If more of one particular item is produced, then less of something else will be produced. • How should they be produced? • Decisions must be made as to what the best combination of available inputs will be to get the job done for the lowest possible cost. Section 1

13. Three Basic Questions (cont.) • For whom should it be produced? • The type of economic system under which people live determines how the goods and services will be distributed among its members. Section 1

14. A B C Deciding how many laborers to hire falls under which question? A.What goods and services should be produced? B.How should they be produced? C.Who should share in what is produced? Section 1

15. Types of Economic Systems There are four basic types of economic systems: traditional, command, market, and mixed. Section 1

16. Types of Economic Systems (cont.) • Economists have identified four theoretical types of economic systems. • Thetraditional economysystem makes decisions based on customs and beliefs that have been handed down from generation to generation. Section 1

17. Types of Economic Systems (cont.) • Advantages: • You know what is expected of you. • Family and community ties are strong. Section 1

18. Types of Economic Systems (cont.) • Disadvantages: • Change is discouraged and perhaps punished. • Methods of production are often inefficient. • Choices among consumer goods are rare. • Individuals rarely experience an increased level of material well-being. Section 1

19. Types of Economic Systems (cont.) • In acommand economy (or controlled)system, government leaders control the factors of production and make all decisions about their use. Section 1

20. Types of Economic Systems (cont.) • Disadvantages: • Lack of incentives to work hard or show inventiveness. • Lack of consumer choices. Section 1

21. Types of Economic Systems (cont.) • In a market economy (or capitalist) system, individuals own the factors of production and make economic choices based on market price while looking out for their own and their families’ best interests. • Amarket is the voluntary exchange of goods and services between buyers and sellers. • Prices in a market coordinate the interaction between buyers and sellers. Section 1

22. Types of Economic Systems (cont.) • The flow of resources, goods and services, and income in a market system is a circular flow of income and output. View:Circular Flow of Income and Output Section 1

23. Types of Economic Systems (cont.) • Advantages: • People have freedoms. • Competition provides consumers with a wide array of goods and services to choose. • There is an efficient system of determining costs. Section 1

24. Types of Economic Systems (cont.) • Disadvantages: • Lack of concern about those too young, too old, or too sick to work. Section 1

25. Types of Economic Systems (cont.) • Amixed economysystem combines characteristics of more than one type of economy. • Most countries have a mixed economy in which private ownership of property and individual decision making are combined with government intervention and regulations. Section 1

26. A B C D In which type of system would you be “guided” into a career by a group of central planners? A.Traditional B.Command C.Market D.Mixed Section 1

27. Section 1-End

28. Section Preview In this section, you will learn about the major characteristics of a market economic system. Section 2-Main Idea

29. Content Vocabulary • capitalism • laissez-faire • free-enterprise system • profit • profit incentive • competition • private property Section 2-Key Terms

30. Academic Vocabulary • regulate • license Section 2-Objectives

31. A B C How much does advertising affect you? A.A lot B.A little C.Not at all Section 2-Polling Question

32. Limited Role of Government Under capitalism, government plays a relatively limited role in the allocation of resources. Section 2

33. Limited Role of Government (cont.) • Capitalism is another name for the market economy system. • Pure capitalism has been called aLaissez-faire system; a French term meaning “let (people) do (as they choose).” Section 2

34. Limited Role of Government (cont.) • Capitalism in the United States is best defined as an economic system in which private individuals own the factors of production but use them within certain legislated limits. Section 2

35. A B Since the 1880s, the role the government plays in regulation has remained predominantly the same. A.True B.False Section 2

36. Other Characteristics In a free market, economic activity is coordinated by private businesses and individuals responding to market signals. Section 2

37. Other Characteristics (cont.) • The American economy is known as a free enterprise system. Individuals are free to own the factors of production and decide how to use them within legal limits; same as capitalism. Section 2

38. Other Characteristics (cont.) • Americans also have freedom of choicewherebuyers, not sellers, make the decisions about what should be produced. • At times, the government has intervened in various areas of the economy to protect buyers and regulate price. • The goal of a business is to make a profit. Section 2

39. Other Characteristics (cont.) • The desire to make a profit is referred to as profit incentive or profit motive. • The risk of failing, when profits are not realized, is also part of the free-enterprise system. • In a free-enterprise system, the lure of profits encourages competition. • For competition to exist, industry barriers to enter into, and exit from must be weak. Section 2

40. Other Characteristics (cont.) • Competition leads to an efficient use of resources since businesses are forced to keep costs of production as low as possible. • One of the most important characteristics of capitalism is the existence of private property. View:Characteristics of the American Economy Section 2

41. A B C How much freedom should individuals have regarding the economy? A.A large amount B.A moderate amount C.A small amount Section 2

42. Section 2-End

43. Section Preview In this section, you will learn about the goals of the American free-enterprise system and the rights and responsibilities that individual Americans face as members of this system. Section 3-Main Idea

44. Content Vocabulary • economic efficiency • economic equity • standard of living • economic growth Section 3-Key Terms

45. Academic Vocabulary • element • expand Section 3-Objectives

46. Goals of Free Enterprise The economic goals of free enterprise are freedom, efficiency, equity, security, stability, and growth. Section 3

47. A B C Do you think the United States upholds certain economic values? A.Always B.Sometimes C.Rarely Section 3-Polling Question

48. Goals of Free Enterprise (cont.) • Economic goals of Americans: • Freedom—to allow each member of society to make choices • Economic efficiency—wise use of limited resources • Economic equity—economic system should be fair and just Section 3

49. Goals of Free Enterprise (cont.) • Economic security—want protection against risks beyond our control • Economic stability—attempt to reduce extreme ups and downs in the standard of living • Economicgrowth—increased production of goods and services over time Section 3

50. A B C D “Because of scarcity, if the factors of production are wasted, fewer good and services overall will be produced.” Which goal does this quotation fall under? A.Freedom B.Efficiency C.Security D.Growth Section 3