HW RB, p.14/VI 1 economic 2 economic3 economy 4 economic5 economical 6 economic7 economy 8 economics9 economical 10 economy11 economical 12 economy13 Economics 15 economy16 economic 17 economist18 economic 19 economic -

economy20 economics 21 economic22 economise 23 economic24 economical 25 economics26 economists 27 economise

TYPES OF ECONOMIC SYSTEMS

Economic system:An organized way in which a state or

nation allocates its resources and apportions goods and services in the national community.

To allocateTo apportion

Resources

= To share out according to a plan

= Anything that is used to produce goods and services

SOME BASIC PREMISES…

Resources are limited/ scarce.Human wants exceed resources.The economy decides how to allocate

scarce resources by answering some basic questions.

ECONOMIC QUESTIONS→TYPE OF ECONOMY

What to produce? How to produce?For whom to produce?

MARKET ECONOMY

PLANNED ECONOMY

MIXED ECONOMY

Reading: RB, p. 30

• Read the first two sections and fill in the first two columns in exercise II (p. 31).

Market / capitalist /free-market economies

Role of gov.:Limited (e.g., passes laws, provides essential

goods & services, ensures fair competition)• Ownership of resources:By private individuals.Allocation of resources:By the market mechanism (forces of supply &

demand)• Competition: Yes.Advantages:Competition →lower costs, wider choice of goods

and services, better qualityDisadvantages:Firms may sacrifice public interest for profit, lower

costs and private interests,market imperfectionsunequal distribution of wealth

Planned / command economiesRole of gov.:Vital: owns resources, distributes goods and services, plans, organizes and co-ordinates production• Ownership of resources:By the stateAllocation of resources:By the state• Competition: No.Advantages:more equal distribution of income and wealth, production for need, not profitDisadvantages:No competition standardised goods of little variety

and low quality,consumer choice is limited, low motivation to workstandard of living is lower

Read “Mixed economies”

Complete the table in exercise II.

Mixed economies: the public sectorRole of gov.:Supplies some public goods and services free at point of use (paid for by taxes.)

• Ownership of resources:By the stateAllocation of resources:By the state• Competition: No.Advantages:The state provides a minimum standard of

living for everyone (welfare state); Disadvantages:Not mentioned in the text.

Mixed economies: the private sectorRole of gov.:Ensures fair competition. Some regulation of private sector businesses

through laws. Private sector businesses also benefit from public goods and services.

• Ownership of resources:By individuals and businesses.Allocation of resources:Market system (market mechanism)• Competition: Yes.Advantages:Not mentioned in the text.Disadvantages:Not mentioned in the text.

Look at the images and decide:

Which characteristics of market and planned economies do the images illustrate?

Why? Explain your answers using your notes.

Unequal distribution of income: Homelessness

Lower quality of products and standard of living

Unequal distribution of income: Large poor-rich gap

A trailer A recreational vehicle (RV)

Little variety and choice for consumers

Sacrificing public interest in exchange for lower costs: Outsourcing

Unmotivated workers, standardisation

Sacrificing public interest in exchange for lower costs: Sweatshops

VERBS NOUNS

AllocatePlanOrganiseCo-ordinateDistributeSupplyCommandCompeteProduce

AllocationPlanOrganisationCo-ordinationDistributionSupplyCommandCompetitionProduction