Economic Systems

Introduction to Business

Block 5

C-114

Do Now

• Please think of any popular business in the local area…

• Who are the competitors to this business?

• What other options do you have in terms of competition not totally related to the original business?

Standard

• 1.2 Investigate the elements capitalism and the market economy.

• 2.1 Analyze economic indicators, Identify measurement tools used to gauge various phases of the business cycle,

Goals

• Define direct and indirect competition and determine how each affects business decisions

• Define and determine how supply and demand operates in a market economy

• Identify businesses or products affected by supply and demand• Determine how market price is established given certain business situations• Illustrate the demand and supply curves and market price.• Define GDP, GDP per capita, labor productivity, unemployment rate, retail

sales• Calculate GDP, GDP per capita, LP• Explain how economic measurements assist in making informed business

decisions.• Determine which economic measurements are effective for predicting future

growth

Mixed Economies

• A mixed economy is an economic system that incorporates aspects of more than one economic system. This usually means an economy that contains both private-owned and state-owned enterprises[1] or that combines elements of capitalism and socialism, or a mix of market economy and planned economy characteristics

Capitalism

• Capitalism refers to an economic system in which the means of production are privately owned and operated, and in which investments,income, production and pricing of goods and services are determined through the operation of a market economy

Market Economy

• A market economy is an economy in which the individuals are free to exchange or distribute legal goods and services.

• These decisions are influenced by the pressures of competition, supply, and demand.

• This is often contrasted with a planned economy, in which a central government decides what will be produced

Private Property

• The right to own, use and dispose of property

• Dispose of means to sell

• The right to sell at a profit.

Direct Competition

• When two competitors sell products in the same category and are identical products

• Usually creates more choices

• Better service

• Lower prices

• Example McDonald’s v. Burger king

Indirect Competition

• When 2 companies are selling different products or services but they are in the same category

• Gives consumers alternatives

• Indirectly affects sales and profits

Activity

• On the computer please create a list of images that represent Direct(4) v. I

• direct(2) competition. Example:

Then answer: Why does indirect competition have a large impact on any business in today’s society? Hint: Think about yesterday’s notes on resources as part of your answer.

Freedom of Choice

• People have the right to buy any item they choose.

• Buyers cannot be forced to buy certain items or shop at certain stores.

• Sellers cannot be forced to sell whatever a buyer demands

• Example: Wal-Mart cannot be forced to sell cars.

Exit Ticket

• Check your understanding:• 1. Please differentiate a capitalist society from a

socialist or communist society. What evidence do you see in a capitalist society that defines the risk/reward theory?

• 2. Predict what prices and consumer choices would look like if more monopolies existed…

Your Answer

• 1.

• 2.