Traditional, Command, & Market

Transcription

1 Traditional, Command, & Market

2 Scarcity is the Root of Economics There is not a single country in the world that has an abundance of all the resources that its people need/want. Scarcity = the limited supply of something Because of this, countries must make a plan of how to use these limited resources. This plan is called an *Economic System! an economic model used by governments to determine what should be produced/provided in terms of goods and services, how, and for whom

3 Three Little Questions When developing the economic plan, each country must ask three basic economic questions: 1. What goods/services will be produced? 2. How will goods/services be produced? 3. Who will consume the goods/services? The way a country answers these questions determines what kind of economic system it will have: Traditional Command Market

4 Traditional Economy *An economic model governed by custom, habit, and history All economic decisions are based on customs, traditions, & beliefs of the past. People will make what they always made & do the same things their parents did. The exchange of goods is done through bartering. Bartering = trading without using money Some Examples: Amish, villages in Africa & South America, the Inuit in Canada, Aborigines in Australia

5 Command Economy *An economic model wherein all economic decisions are made by the Government. The government owns most of the property, sets the prices of goods, determines the wages of workers, plans what will be made everything. This system has not been very successful. More and more countries are abandoning it.

6 Market Economy (Capitalist) *An economic model which the laws of supply and demand (not government oversight) determine what is produced/consumed and at what cost Private citizens make economic decisions based on supply and demand. Supply and Demand - So we have supply, which is how much of something you have, and demand, which is how much of something people want. Put the two together, and you have supply and demand. The price of something will go up if the demand goes up. Why? Because the seller thinks he or she can get more money for whatever he or she is selling. In the same way, the price will go down when the demand goes down..

7 Market (Capitalism) Economy Free enterprise helps make these decisions. Free Enterprise = competition between companies (shifts prices of goods/services) The government has no control over the economy; private citizens answer all economic questions.

8 Hmmmm... Since there are no countries that are purely command or purely market, what does that make them? Comket? Markmand? Ha! Most democratic countries have some characteristics of both systems, so we keep it simple and call them: Mixed! Of course, most countries economies are closer to one type of system than another

9 A tariff is a tax put on goods imported from other countries coming into your country! The effect of a tariff is to raise the price of the imported product. How does a Tariff impact your economy? It makes imported goods more expensive so that people are more likely to purchase lower-priced items produced domestically.

10 A quota is a limit on the amount of a good that can be imported into country No, No, No you can only send1000 Beanie Babies into my country! Example: A country might limit the amount of cars imported from other countries to 500,000 per year. Putting a quota on a good creates a shortage, which causes the price of the good to rise and makes the imported goods less attractive for buyers. This encourages people to buy domestic products, rather than foreign goods. How does a Quota impact your economy? Quotas encourage people to buy domestic products, rather than foreign goods (boosts country s economy) Now they will buy my Beanie Babies instead of those from Yugoslavia, this will increase my business and improve my countries economy!

11 A government order which completely prohibits trade with another country. one country completely refuses to trade with another country. The government orders a complete ban on trade with another country. Example The US had an embargo with South Africa during apartheid. Example The US has an embargo with Cuba that has lasted over 50 years. Breaking news the United States and Cuba are beginning to trade again. The embargo is the harshest type of trade barrier and is usually enacted for political purposes to hurt a country economically.

12 *The act of economically punishing another nation What does it mean to put Sanctions on a country? A sanction is a penalty imposed on another country. It is an instrument of foreign policy and economic pressure to try and convince a country to do (or stop doing) what you want. A Sanction can be described as a sort carrot-and-stick approach to dealing with international trade and politics - reward and punishment to induce a desired behavior.

13 * Voluntarily and intentionally not from buying or dealing with a country as an expression of protest Boycotts are usually for social, political, or environmental reasons.... Sometimes, a boycott can be a form of consumer activism, sometimes called moral i.e: The Montgomery Bus Boycott, was a political and social protest campaign against the policy of racial segregation on the public transit system of Montgomery, Alabama.

14 Trade barriers provide many benefits: They protect homeland industries from competition. They protects jobs. They help provide extra income for the government. They increase the number of goods people can choose from. They decreases the costs of these goods through increased competition.