bell ringer explain how in a peoples decisions act as “dollar” votes
TRANSCRIPT
Bell Ringer
Explain how in a peoples decisions act as “dollar” votes.
Economic Systems
Chapter 2, Section 1
What economic system is being employed here?
What economic system is being employed here?
Objectives
Students will be able to:
- Describe the characteristics of the traditional, command, and market economic systems.
- Explain the advantages and disadvantages of the traditional, command, and market economies.
Economic system
The organized way that a society provides for the wants and needs of their people.
Traditional Economy
- Allocation of scarce resources is determined by ritual, habit or custom.
- Skills passed from generation to generation
Traditional: Advantages
WHAT answered jobs are inherited
HOW answered same goods
FOR WHOM answered shared benefit
• Sets forth certain economic roles for all members of the community
• Stable, predictable and continuous life
Traditional: Disadvantages
1. Discourages new ideas and new ways of doing things
2. Stagnation and lack of progress
3. Lower standard of living
Traditional: Summary
Advantages- 3 questions
answered by tradition- Stable, predictable
and continuous life
Disadvantages- Resistant to change- Stagnation and lack
of progress- Lower standard of
living
Command Economy
A central authority answers WHAT, HOW, and FOR WHOM. The people have little, if any say, over how the basic economic institutions are answered.
Examples: North Korea and Cuba
Command: Advantages
Centralized decision making
1. Capable of dramatic change in a short time
2. Little uncertainty over choice of career, where to work, or losing job.
3. Education, health and other public services at little or no cost.*
Command: Disadvantages
1. Does not meet wants and needs of consumers2. Lacks effective incentives to get people to
work3. Requires large bureaucracy, which consumes
resources4. Has little flexibility to deal with small, day to
day changes.5. New ideas discouraged, no room for
individuality
Command: Summary
AdvantagesCapable of dramatic change
in a short timeCan change direction
quicklyLittle uncertainty over choice
of career, where to work, or losing job.
Education, health and other public services at little or no cost.
DisadvantagesDoes not meet wants of
consumersLacks effective incentivesRequires large bureaucracyHas little flexibilityNew ideas discouraged, no
room for individuality
Market Economy
People and private firms act in their own best interests to answer the 3 economic questions.
Advantages: Market Economy
1. Able to adjust to change gradually
Other Economies on Change:
Traditional: Discouraged, none at all
“change is the destruction of our culture”
Command: Delayed b/c of bureaucracy or sudden b/c forced on people.
Advantages: Market Economy
2. High degree of individual freedom
Individuals decide the answers to the 3 Questions
Q: How important would individuals in a traditional economy feel about individual freedom? In a command economy?
Advantages: Market Economy
3. Small degree of government interference because it interferes with competition.
- Except for important concerns such as national defense and environmental protection.
Does the artist believe that tariffs are necessary for steel production?
Advantages: Market Economy
4. Decision making is decentralized
- Every individual makes economic decisions so everyone has a voice in how the economy runs.
Advantages: Market Economy
5. Incredible variety of goods and services
Q: Agree or Disagree? “Almost any product can and will be produced if it can be imagined”
Buy me!!!
6. High degree of consumer satisfaction
51% of people can want blue shirts
49% of people can want white shirts
Unlike an election, majority and minority can get what they want.
Advantages: Market Economy
1.Does not provide for the basic
needs of every-one in society
Disadvantages: Market Economy
Too old, too sick, too poor, too bad!
Disadvantages: Market Economy
2. Does not provide enough of the services that people value highly (private producers concentrate on providing products that they can sell)
Disadvantages: Market Economy
3. High degree of uncertainty
- workers worry about losing jobs, benefits
- employers worry about another company will produce a better, cheaper product and lose business
Disadvantages: Market Economy
4. Must guard against market failure.
Markets can fail if three conditions are not met.
1. Markets must be competitive, (competition forces improved value which should lower price)
Second Guard Against Market Failure
2. Resources must be free to move. Workers (your labor is a resource) must be able to change jobs if they have a better opportunity elsewhere.
Third Guard Against Market Failure
Consumers need access to adequate information so that they can weigh the alternatives and make wise choices.
Q: Is advertising not adequate information?
Market: Summary
Advantages:1. Able to adjust to change
gradually2. High individual freedom3. Lack of government
interference4. Decentralized decision
making5. Incredible decision making6. High consumer
satisfaction
Disadvantages:1. Rewards only productive
resources; does not provide for too old, too sick to work
2. Workers and business face uncertainty as a result of competition
3. Does not produce enough public goods such as defense, universal health care
4. Must guard against market failure
Task: Venn Diagram Construction
Construct Venn diagrams finding the similarities and differences between the each possible pair of the economic systems.
1. Traditional-command
2. Command-market
3. Traditional-market