Objective 7 4 Basic economic systems Command economy
Objective 7. 4 Basic economic systems Command economy Vs. Free Market Economy
What is an economic system? an established way of dealing with…
economic systems are established ways of dealing with WHO makes economic decisions What? How? For whom? How Many?
“Chart of economic systems” WHO DECIDES? What to produce? How much produced? For whom to produce? OR
Command vs Free-Market Economic systems
Characteristics of a command economic system centrally planned economy: The government decides What? How? For whom? How Many?
command economic system centrally planned economy: The central government has complete control over all economic choices
command economic system central ownership of property and resources: The central gov’t owns all factors of production and decides how resources are used
command economic system The individual has no private property and no control over economic choices
Characteristics of a command economic system lack of consumer choice: the consumer has NO choice in deciding what will be produced
command economic system COMMUNISM: is a type of command economic system
Free Market economic system Individual Choice • individuals own resources as private property • Owners of private property make their own economic decisions What? How? For whom? How Many?
Free Market economic system The government plays little role in making economic decisions
Free Market economic system private ownership of resources: Individuals own the factors of production and decide how resources are used • Anyone can be an entrepreneur
Free Market Economic decisions are motivated by profit: $ from sales – expenses=profit “money that is made after the bills are paid” Profit gives people more wealth, which allows them to produce & consume
Free Market economic system consumer sovereignty (control): Consumers can decide how to meet their wants & needs • Consumer demand drives what G/S (Goods and Services)are produced • Producers supply what consumers Demand
Free Market economic system Promotes competition: producers compete for profits • Similar products by different producers made to meet demand (Coke vs. Pepsi)
Free Market economic system Benefits of competition: • More consumers choices • Fair prices for G/S • Leads to new product ideas
Free Market economic system CAPITALISM: One type of free market economic system is “capitalism”
Chart of economic systems WHO DECIDES? What and how much produced How to produce For whom to produce
Which characteristics define mixed market economy? Objective 7. 5
Describe the role of the government in the United States economy Objective 7. 6
Which characteristics define mixed market economy? There are no true Command or free market economies in the world today.
Which characteristics define mixed market economy? • Most economies are some combination of the two • These are called Mixed Market economies
Which characteristics define mixed market economy? Mixed market economy Command + Demand=Mixed ** the most common economic system used in the world today. **
Which characteristics define mixed market economy? Existence of a Economic decisions are made by individuals & businesses
Which characteristics define mixed market economy? Individuals/businesses that own private property and produce G/S for consumers
Which characteristics define mixed market economy? Existence of a Economic decisions are made by the government
Which characteristics define mixed market economy? Government owned resources used to produce public G/S
Two different Mixed Markets China vs USA
Which characteristics define the US Economy? The Economic system of the U. S. = mixed market system
Which characteristics define the US Economy? 1. Private companies operate with limited government role 2. Shows most characteristics of a free market *Ownership of Private property *Competition *profit *consumer sovereignty
Which characteristics define the US Economy? What is the role the government plays? The role of the gov’t is limited but also very important to the health of the US economy
Government… Prevents unfair business practices Ex-monopolies
Government… regulates business by creating regulatory agencies
FTC (Federal Trade Commission) investigates businesses for monopolies and unfair practices
FCC (Federal Communications Commission) regulates radio and TV
EPA (Environmental Protection Agency) protects and enhances the environment
Government… provides public goods & services paid for with tax revenue
example: vinterstate highways v. U. S. Postal Service vnational defense
Government… Pass laws to protect consumer & property rights
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