Economic Systems and Economic Tools 2 1 I

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Economic Systems and Economic Tools 2. 1

Economic Systems and Economic Tools 2. 1

I. Three Economic Questions • aka Allocation Questions

I. Three Economic Questions • aka Allocation Questions

1. What goods and services will be produced? – What will we use scarce

1. What goods and services will be produced? – What will we use scarce resources to produce?

2. How will goods and services be produced? – How should scarce resources be

2. How will goods and services be produced? – How should scarce resources be combined to produce goods and services?

3. For whom will goods and services be produced? – Distribution question: equal distribution,

3. For whom will goods and services be produced? – Distribution question: equal distribution, patience, height, weight, strength, etc.

• Interdependent Question – The answer to one of the three questions will

• Interdependent Question – The answer to one of the three questions will probably determine the answer to the other two

II. Economic Systems • (Pure) Market Economy – Individuals own & control Fo. Ps

II. Economic Systems • (Pure) Market Economy – Individuals own & control Fo. Ps – Adam Smith— Invisible Hand – Voluntary Exchange • Capitalism

• Command Economy – Government owns & controls Fo. Ps – Began as

• Command Economy – Government owns & controls Fo. Ps – Began as Socialism – Karl Marx— communism – Central planners

• Mixed Economy – Varying combinations of the major economic systems – Traditional

• Mixed Economy – Varying combinations of the major economic systems – Traditional Economy— shaped by custom and religion; some occupations are shaped by tradition

Practice • Capitalism vs. Socialism – In groups read & HIGHLIGHT information Advantages Disadvan.

Practice • Capitalism vs. Socialism – In groups read & HIGHLIGHT information Advantages Disadvan. Advantages of Capitalism of Socialism Disadvan. of Socialism

Social Goals of an Economy • On the following notes write the highlighted material

Social Goals of an Economy • On the following notes write the highlighted material ONLY • Predict which goals would be more important to a: – Market Economy (Capitalist system) – Command Economy (Socialist System)