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Warm-up 1. What is Capitalism? 2. List 2 synonyms for capitalism. 3. Who makes the most decisions when you have a market economy? 4. List 3 reasons why capitalism works.
QUIZ Tomorrow • 25 questions • Matching and MC • Study • Vocabulary • Into to Economics • Making Economic Decisions • Revenue … • Capitalism
Measure of Economies Around the World • People often measure economic well- being by the amount of their income. The success of the overall economy is measured in a similar way. Countries call this the GDP. • The Gross Domestic Product (GDP) is the total value in dollars, of the final goods and services produced in a country during a single year
Economic Systems • Economic Systems around the world vary. In the US, they are based on markets. Other’s like China feature far greater government control
Basic Economic Questions • What goods and services should be produced? • How should these goods and services be produced? • For whom should these goods and services be produced?
Traditional Economy • Traditional Economy- relies on habits and customs; Economic decisions are based on beliefs, (often religious) handed down from generation to generation • How are economic questions answered in the traditional economy? • By tradition • Not concerned about growth of the economy • Who/What influences the economy? • Traditions, customs, precedent • Production of goods is based on needs or essential services
Traditional Economy • Advantages- • little surplus or waste of goods • people know their role in society • less destructive to the environment • much cooperation among the people; shared resources • Disadvantages • Lower standards of living • prone to vulnerability due to changes in the weather • difficult to change • Example- Tribes
Market Economy • Market Economy- Economic system is which all economic decisions are made by the citizens • How are economic questions answered in the market economy? • What? Most profitable • How? Least cost • For Whom? Highest bidder • Growth is successful and efficient • Who/What influences the economy? • Citizens, Supply & Demand, Competition, Invisible Hand • In this system the Government loses power
Market Economy • Adam Smith is the founder of Modern Economics; Capitalism • Advantages- • Promotes production • Innovation and development • People have choice • Disadvantages- • Profit Motive; In many cases, companies may sacrifice worker safety, environmental standards and ethical behavior to achieve those profits • When a free market spins out of control, the consequences can be severe • Example- The United States (FINAL EXAM ANSWER)
Command Economy • Command Economy- Government makes all decisions on the production and consumption of goods • How are economic questions answered in the Command economy? • Whatever the government decides is needed at the least cost method • Growth is slow and insufficient • Who/What influences the economy? • Government has complete control • In this system people/citizens lose power
Command Economy • Karl Marx’s- Communist Manifesto • Socialism- the belief that the means of production should be owned and controlled by society either directly or through the government; Wealth is distributed equally among the citizens • Communism- Land capital are owned by the government not private citizens and the Government decides what to produce, how to produce the goods, and for whom to produce the goods for; Fixes the wages of all workers and sets prices
Command Economy • Advantages- • Decisions are made quickly and effectively • Governments can execute massive projects and build industries • Override self interest • Easy to rebuild the economy • Disadvantages • Individuals needs are ignored • Innovation is limited • Has trouble in global markets • Do not listen to consumers • Examples- Cuba, North Korea, Iran, Soviet Union (1920 -1991); Communism and Socialism
Mixed Economy • Mixed Economy- Market and government based • How are economic questions answered in the Mixed economy? • Government & citizens • Growth depends on the government and citizens; varies • Who/What influences the economy? • Citizens and Government; also Elections and accountability • In this system the government or citizen can lose power; varies • John Maynard Keynes- The Economic Consequences of the Peace
Mixed Economy • Advantages- • State provides the essential services • Private sector encouraged for profits • Competition keeps prices low • Consumer choice • Inefficient business behavior controlled • Disadvantages- • Heavy taxes reduce incentives to work hard or make profits • Less efficient than private sector • Excessive control over business activity can add costs and discourage enterprise
Mixed Economy • Examples- Technically United States (not the exam answer), mostly market, some command; China, mostly command, some market; France, Canada, United Kingdom
Economic Systems Chart Make a Hand Turkey! Choose one of the following Traditional Economy Free Market Economy Command Economy Mixed Economy Become an expert on one of the above. Use the hand turkey to tell about that economic system. On the hand write the name of one economic system. On the fingers use words or phrases that describe the system. P 715 or use your technology
Part 2 Group Activity- Venture Capitalist After researching. Create an oral presentation about your person to share with the class. It can be a short oral report, a poem, a rap, a song or a play. No written expression! We will share these Monday after the Quiz.