Economic Systems and Decision Making Chapter 2

Transcription

1 Economic Systems and Decision Making Chapter 2 I Economic Systems A. Objectives: 1. Describe the characteristics of the traditional economy. 2. Explain the strengths and weaknesses of the command economy. 3. Examine the strengths and weaknesses of a market economy. B. Traditional Economy 1. Traditional Economy a. Masai tribe in Africa b. Aborigines in Australia c. 2. Strengths a. Everyone knows which role to play. Little uncertainty exists over WHAT to produce. Little uncertainty exists over HOW to produce because you do it as your parents did. The FOR WHOM question is determined by the customs and traditions of the society. b. 3. Weaknesses a. C. Command Economy 1. Command Economy- a. China, Cuba, or the former Soviet Union.

2 2. Strength a. 3. Weaknesses a. Not meant to meet wants and needs of individuals. b. c. Requires a large decision-making bureaucracy, which consumes resources. d. e. T-1 When answering the governmental questions, Where is the geographic power? and How many can participate? this type of economic system leans towards which type of governmental system? What are they and why? 2

3 D. Market Economy 1. Market economy a. The United States, United Kingdom, and Japan. 2. Strengths a. b. c. Notable lack of government interference. d. e. Incredible variety of goods and services. f. 3. Weaknesses a. b. Must guard against market failures. T-1: Can there be too much of a good thing? Is the incredible variety of goods and services an example of conspicuous consumption? 3

4 Economic Systems of the World Directions: Decide whether the statement reflects a Traditional, Market or Command economic system and place a T, M, or C in the blank provided. 1. Economic activity stems from habit. 2. China s economic system. 3. The wants and needs of an individual are not considered. 4. A high degree of consumer satisfaction occurs. 5. An Eskimo s economic system. 6. Lacks effective incentives. 7. The availability of choice to buy from 100 different styles of Nike shoes. 8. A planning agency shifts resources to produce different goods in a brief time. 9. Discourages new ideas and new ways of doing things. 10. Without government intervention, needs of the sick and elderly would not be met. 11. A milk factory stops producing ice cream because the freezer breaks down and no one in the factory has the authority to get it fixed. 12. Has many entrepreneurs that are the driving force of the economy. 13. A stable, predictable, and continuous way of life. 4

5 Economic Systems of the World Examples: Definition: Weaknesses: Strengths:

6 II. Evaluating Economic Performance A. Objectives 1. Describe the basic economic and social goals used to evaluate economic performance. 2. Examine the trade-offs among economic and social goals. B. Economic and Social Goals 1. Economic Freedom a) 2. Economic Efficiency a) 3. Economic Equity a) Equal pay for equal work; in other words, businesses cannot discriminate. b) Producers cannot take part in false advertising. 4. Economic Security a) Social Security 5. Full Employment a) When the economy can provide as many jobs as possible. b) This does not necessarily mean that there is no unemployment. 6. Price Stability a) Inflation a rise in the general level of prices. b) Fixed income 6

7 7. Economic Growth a) The process of people getting bigger and better things because they are making more money. b) 8. Future Goals a) The goals that We the People make for our country and economy; in other words, what we want to see happen. T-1 Which goal do you believe is the most important and why? 7

8 C. Trade Offs Among Goals 1. Economic policies have opportunity costs a) The US could help the goal of full employment in the local shoe industry by keeping foreign-made shoes out of the US, however, this may end up giving people fewer shoe choices, which violates individual freedom. T-2 You have already picked the goal that you deem as the most important. What is the opportunity cost for that goal? 8

9 III. Capitalism and Free Enterprise A. Objectives 1. Explore the characteristics of a free enterprise system. 2. Describe the role and importance of the entrepreneur. 3. Examine the role of the consumer as a sovereign entity in the economy. 4. Describe the roles the government plays in a free enterprise economy. B. Characteristics of a Free Enterprise Economy 1. Economic Freedom a. Capitalism 2. Voluntary Exchange a. 3. Private Property a. Yes, there are places where you cannot own anything!! 4. Profit Motive a. Profit b. Profit motive C. The Role of the Entrepreneur Have worked for others, but decided to quit and be their own boss. 3. 9

10 D. The Role of the Consumer If consumers like the product, that product will sell. If consumers do not like the product, it will fail. 3. Consumers want change constantly as communications and technologies keep developing more and more. E. The Role of the Government 1. The government reflects the wants and needs of its citizens, so the government has taken on different roles. 2. Protector- a. Misleading advertisement, impure food and drugs, and unsafe automobiles. 3. Provider and Consumer- a. Education, parks, and defense 4. Regulator- a. 5. Promoter of National Goals- a. As a promoter, the government reflects the will of the people. Many functions of government show how citizens wanted to modify the economic system. b. Because of the modifications, the U.S. is said to have a mixed economy. (1) Mixed economy ( )- an economy in which people carry on their economic affairs freely but are subject to some government intervention. (2) The US government sets on products like farm goods and steel, among other things. 10

11 Section 1 Chapter 2 Readings From what three things do economic activities stem in a traditional economy? (1 pt) 2. Explain the two main strengths of a traditional economy and give examples. (2pts) Explain the two main weaknesses of a traditional economy and give examples. (2 pts) How are roles described in a traditional economy? (1 pt) 5. Explain how the WHAT, HOW, AND FOR WHOM questions get answered in the traditional economy. (1pt) 6. Who makes most of the economic decisions in a command economy? (1pts) 7. Explain the main strength of a command economy and give an example. (2pt) 8. Explain the five weaknesses of a command economy and give examples. (10pts)

12 9. Explain how the WHAT, HOW, AND FOR WHOM questions get answered in a command economy. (1pt) 10) Explain how economic decisions are made in a market economy. (1pt) 11) Explain the six strengths of a market economy and give examples. (12pts) ) Explain the two main weaknesses of a market economy and give examples of each. (2pts) 13) Explain how the WHAT, HOW, AND FOR WHOM questions get answered in a market economy. (1pt) 14) Define: (1pts per) Economy Economic System 39 12

13 Section 2 1). Explain the eight broad social and economic goals of the United States. (8 pts) A) B) C) D) E) F) G) H) 2). (A) Explain what Social Security is. (1pt) B) What goal does it support? (1pt) 3). (A) Explain what inflation is. (1pt) (B) What economic goal does it run counter to? (1pt) 4). Why is economic growth a goal of most Americans? (1pt) 5). What are some of the economic choices people and producers in the United States are free to make? (1pt) _ 6). Explain how an increase in the minimum wage might involve a conflict of goals. (1pt) 7). What characteristics does the United States economy have that allow it to resolve conflicts among goals? (1pt) 8) How do laws against false advertising promote economic equity? (1pt) 13

14 9). Define (1pt per) Social Security Inflation Fixed Income 21 Section 3 1). Name and explain the four important characteristics of a market economy? (4pts) A.) B.) C.) D.) 2). Explain the meaning of the term voluntary exchange: (1pt) 3). What incentives do people receive by being able to own private property. (1pt) 4). Explain what motivates people to improve their material well-being and, by doing so, drive a free enterprise economy. (1pt) 5). Explain why the entrepreneur is one of the most important people in the market economy. What aspects of the economy benefit from an entrepreneur succeeding? (2pt) 6). Explain why the consumer is considered sovereign in a market economy. Explain how consumers express their wants. (2pts) 14

15 7). Name and explain the four roles that the government plays in the American economy. (4 pts) A.) B.) C.) D.) 8). Explain why the American economy is referred to as a mixed economy or a modified private enterprise economy: (1pt) 9). Describe the role of profit motive in a free enterprise system. (1pt) 10). Explain how Americans varying economic goals have modified their free enterprise economy. (1pt) 11). Define Capitalism Competition Voluntary Exchange Private Property Profit_ Profit Motive Consumer Sovereignty Mixed Economy _ Modified Private Enterprise Economy 27 15

16 Class Agenda, Assignment, Homework and Employability Log: Remember if you don't receive employability points today, you still need to complete the assignment because when you turn your whole packet in, you receive assignment points. Date Class Agenda Assignments Due Date Handed In Comments 16