Introduction to Economic Systems

Introduction to Economic Systems

Why are we learning about economic systems?

• We will be able to compare each different economies.

• We will learn what is produced is each system.

• We will learn how those things are produced.

• We will learn for whom those things are produced.

What is an economic system?

An economic system is the decision-making structure of a nation's economy, characterized by the entities and policies that shape it.

It is the process by which humans deal with scarcity (limited natural resourcs, time, money, water, etc.)

We will discuss four types of economic systems.

• Traditional system

• Command system

• Mixed economy

• Capitalist system

Multiple Select

What are the four economic systems we are going to talk about? Pick all of them.

• Traditional system

• Cheddar system

• Mixed economy

• Command system

• Capitalist system

Traditional Economic System

• Things are done the way they always have been done.

• Past customs and habits are used to decide what and how goods will be produced, distributed and consumed.

• Members of this system know from an early age what their role/job in society will be.

• People musts fulfill their traditional role. (What has been passed from their grandparent to their parent to them.)

• These are found today in developing/poor countries.

Multiple Choice

What is a traditional economic system?

• A pool store

• A system based on past habits, customs and traditions

• A brand new thing only in rich countries

Command Economic System

• The government controls production and makes all the basic decisions.

• The government even decides the role everyone will play and guides people into certain jobs. The people don't pick them themselves.

• The government decides what goods will be made, how much everything will be sold for and how much people will be paid.

• People do not own farms or businesses. These are owned by the government.

• The people are told you have this long to make this much stuff. (Quota) If they don't, there is a shortage.

Multiple Select

What is a command system in charge of?

• What jobs the people have

• The farms and business

• What is being made and how much it will be sold for

• Cheese pizza and how long football is

Capitalist System

• Also called a market system

• The government does not get involved in this system.

• People decide what the factors of production and answers to basic economic questions.

• The market is the freely chosen activities between the buyers and the sellers.

• There is a supply and a demand. The supply is what goods are available, and the demand is how many people want to buy those goods.

Multiple Choice

What is a part of a market or Capitalist system?

• The government controls it all!

• The government is not involved. It is between the buyers and the sellers.

• Chicken are able to rule the world without anyone putting them into cages.

Mixed Economic System

• This is a mix of market and command systems.

• The government can have laws to regulate some businesses.

• The government can step in where there are some inequalities in this system to help figure things out.

Multiple Select

What makes up a Mixed Economic System?

• The government can help when there are inequalities in the system.

• These don't exist.

• The government can make laws to regulate things.

• This system is a mix of market and command systems.

Basic Economic Questions

These questions help the systems with determining key parts of an economic system. We will look at those questions on the next slide.

Basic Economic Questions

• What goods and services should be produced?

• How should the goods be produced?

• Who should the goods be produced for?

Factors of Production

There are four factors of production.

Factors of Production

• Land: provides the natural resources

• Labor: provides the man power

• Capital: provides the equipment and tools

• Entrepreneur: the business person who provides the idea

Vocabulary

Words that are important to the study of economic systems

Shortage

When there is not enough of something to satisfy or please the needs of a country

Supply

The amount of goods available

Demand

How many people or buyers want the goods