Broad Economic Goals

Market and Command Economies

Standard

SSEF4 The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.

Objectives

Students define the six broad social goals of an economic system

…discuss and evaluate the relative importance of the six goals in different economic systems

…evaluate various public policy actions with respect to their impact on the American economy and the achievement of the six goals

Economic Efficiency

Essentially, how well productive resources are allocated and, once distributed, how well inputs are combined into products people want and need

Economic Efficiency

In command economies, resource allocation is determined by the central government; resources are redirected quickly, but businesses are often inefficient

In market economies, supply and demand (producers and consumers) determine allocation; redistribution of resources can be tedious, but business production must be efficient

Economic Equity

Means what is fair. This can be seen as an equality of opportunity or an equality of outcome

Economic Equity

In command economies, wages are often set by the government providing an equality of outcome

In market economies, equality of opportunity is emphasized; success is not guaranteed

Economic Freedom

Consumers ability to decide for themselves how to spend or save their income, when to change jobs, or when to open or close a business

Economic Freedom

In command economies, many decisions are made by central planners, since government owns most productive resources

In market economies, private ownership of resources is emphasized

Economic Growth

Increasing the production of goods and services over time using Gross Domestic Product (GDP); a growth rate of 3-4% a year is considered sustainable

Economic Growth

In command economies, growth targets are set and interpreted by central planners

In market economies, encourage specialization along with avoidance of waste

Economic Security

Protecting consumers, producers, and resource owners from risks that exist in society. Each society must decide from which uncertainties individuals can and should be protected

Economic Security

In command economies, pensions, housing, health care, jobs, and income provided or guaranteed by the government

In market economies, consumers generally responsible for their own security; some programs address anomalies in the economy

Economic Stability

Maintaining stable prices and full employment while keeping growth reasonably smooth and steady

Economic Stability

In command economies, no unemployment, prices usually set below market to ensure everything produced is sold

In market economies, some unemployment is tolerated; fiscal and monetary policies are used to prevent unemployment and inflation

TOTD 1. What economic system offers more freedom?

2. What economic system offers security?

3. What is equity?

4. What system offers greater equity?

5. Increasing taxes would reduce economic ________, but if a portion of the taxes collected were devoted to paying retirement pensions this would increase economic ________

Honors

Would you rather live in a society that offers more economic freedom or economic equity? Explain why and defend your answer.

1-2 paragraphs Due Friday