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1 ECONOMICS D AY 5 M O N D AY, J A N U A RY 1 1 TH
2 OPENER: DAY 5 - MONDAY, JANUARY 11 TH Crash Course - Economic Systems
3 WHAT DID WE LEARN YESTERDAY? Economic Systems An economic system is a system of production and exchange of goods and services as well as allocation of resources in a society.
4 WHAT DID WE LEARN YESTERDAY? Economic Systems WHAT to Produce? HOW to produce it? For WHOM to produce? Examples Traditional Determined by tradition Economic roles often passed from generation to generation Determined by custom Usually centered around traditional family and social units such as a tribe Aborigines of Australia Makati of Central Africa Inuit of Canada Command Determined by government officials Determined by government officials Determined by government officials Old Kingdom Egypt Middle Ages in Europe Zhou Dynasty in China Market Determined by individuals Determined by individuals Determined by individuals United States Canada Australia
5 WHAT DID WE LEARN YESTERDAY? Mixed Economy Market + Command = Mixed Economy
6 WHAT DID WE LEARN YESTERDAY?
7 WHAT DID WE LEARN YESTERDAY? Economic Goals of the U.S.A. Economic: Freedom Efficiency Equal Opportunity Security Full employment Price stability Economic growth
8 WHAT DID WE LEARN YESTERDAY? Continuum of Economic Systems
9 LET S LAYER IN A LITTLE POLITICS Economic Systems Command Mixed Market Free Market Free Enterprise Corresponding Political/ Government Systems Communism Socialism Capitalism Description Government control and ownership of all means of production Government control of major means of production (land and/or natural resources) Low degree of government control with little to no ownership of the means of production And don t forget traditional economies! Very little organized government Subsistence agriculture/farming farmers grow enough to feed their families
10 ADVANTAGES OF FREE ENTERPRISE SYSTEM U.S. is a capitalist economic system This is all based on private ownership of the four factors of production Consumers are free to choose what they buy, producers are free to make what they like, and make as much profit as possible.
11 HOW FREE ENTERPRISE WORKS Free Enterprise is just another name for capitalism With capitalism, you are free to start a business that provides usefulness to consumers Businesses are free to use scarce resources as they please Managers and workers operate these businesses in exchange for pay
12 THE POWER OF THE CONSUMER Consumers decide what they want to buy They look for goods and services to fulfill wants for the best possible value
13 LIMITS OF FREE ENTERPRISE Government only limits free enterprise in small ways ex. Can t take advantage of consumers with unsafe products Some emerging nations using free enterprise set more limits Ex. Make companies offer the same benefits
14 FIVE FREEDOMS OF FREE ENTERPRISE 1. Right to Private Property- ability to own your own land, thoughts, and material items. 2. Equal Opportunity- Anyone can take part in the market by free choice. Ex. No one can tell you that you can t open a deli. This creates a wide range of goods and services to choose from. Forces all business to be productive and efficient. 3. Legal Equality- Everyone in the economy is protected by same economic rights under law. Everyone has the right to succeed or fail.
15 FIVE FREEDOMS OF FREE ENTERPRISE 4. Free Contracts- People choose which agreements to enter into in the market place ex. Buying a house and agreeing to pay a mortgage 5. Profit Motive- force that encourages people to improve their wealth through economic activity
16 COMPETITION IN FREE ENTERPRISE Competition is the struggle between companies for customers Competition is an essential part of the free enterprise system It forces businesses to produce better quality goods and services at reasonable prices
17 COMPETITION IN FREE ENTERPRISE Competition is a regulating force in the economy It allows new producers to enter markets in search of profits. This encourages innovation and creation of better products at competitive prices
18 CIRCULAR FLOW OF A MARKET ECONOMY Circular Flow Model of a Market Economy
19 A DIFFERENT VIEW OF CIRCULAR FLOW DIAGRAM
20 QUESTIONS FOR REFLECTION Which of the five freedoms of free enterprise is most important? Please explain why you feel that way. How would the U.S.A. be different if we had a command economy?
21 HOMEWORK DAY 5, JANUARY 11 TH Your Unit One test is on Wednesday. So review your notes from all our studies. Complete your Study Guide. You ll be turning it in before your test for a grade. Come to class tomorrow with any questions or things you need explained to you.
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