Economic Systems and Development Page 618 625 Essential

Economic Systems and Development Page 618 -625 Essential Skill: Demonstrate understanding of Different Economic systems by giving examples

Quiz coming up… Economics Factors of Production Scarcity Three Basic Questions: What? /How? /Who? Goods & Services Creates a need for an economic system And FINALLY… Define 4 types of economic systems, and give an example of each kind.

How does every country in the world deal with SCARCITY? They create an economic system that answers these questions: • What goods and services to produce • How will these goods and services be produced • Who will consume these goods and services?

Traditional Economy: Economy based on tradition and custom Characteristics • Follow family’s path (less mobility) • Little change over time Disadvantages • Not very productive • Does not adapt well to new methods and technologies Example: Chad

Market Economy: individuals and businesses own resources & make decisions Characteristics • Freedom – to own property and control one’s own labor • Competition – among sellers; buyers look for best quality & prices • High GDP (Gross Domestic Product); very productive Disadvantages • Unsteady Growth – job loss during recessions • Profit-Driven – – Focus on profit – Poor working conditions? Products made with child labor? – Negative externalities: • Pollution • Faulty/dangerous products • Example: CA drought & water-guzzling

Command: government owns resources and makes economic decisions Characteristics • Resources used for “greater good” • Inefficient • Low GDP per capita Disadvantages • Shortages • Poor quality G&S • Slow growth rate China transitioning toward Capitalism since 1970 s…

Mixed-Market: has elements of both market and command economies Characteristics • Individuals, markets and government all influence the economy • (U. S. a market-oriented economy) • Private ownership of business + government regulation and public services Disadvantages • Depends on the “mix” • Too much govt. regulation stifles businesses & innovation • Too little govt. regulation leads to income disparity, fraud, pollution, poor working conditions

Developed Countries • Type: wealthy; high standard of living • Characteristics: mixed market economies; high per capita income & GDP; modernized (strong industry & technology) • Examples (35 ish countries): U. S. , Canada, Japan, Germany, U. K. (roughly 35 in world)

Newly Industrialized Countries • Type: growing economic powers; industrialized • Characteristics: good rate of economic growth; growing export industries • Country Examples: China, India, Mexico

Developing Countries • Type: minimal economic growth; high number of people living in poverty • Characteristics: low income & GDP per capita; low productivity; weak industry; many obstacles • Country Examples: most countries in the world; (Examples: Afghanistan, Cuba, Nicaragua, Guatemala, most African nations) • Question: Based on the ratio of developing to developed countries, what can be inferred about the standard of living of most people in the world? • Most people live at or below the poverty level

Obstacles to Development Be able to explain HOW each problem can hurt an economy. High Population Growth If # ppl increase faster than GDP fewer jobs available & more poverty Single-Resource Economy Slow econ. growth; Country vulnerable; any problem with the resource can destabilize economy Severe Debt Owe much $ to other nations & can’t keep up; Spending on debt repayment rather than investing in economy Trade Barriers Meant to protect local industries, but often protect inefficient businesses, hurting growth War (What is it good for? ) Hurts growth by damaging land, labor AND capital; shortages occur; refugees = loss of labor (“brain drain”) Corruption Leaders steal $ for selves, so less $ to invest in economic growth