STANDARDS: SS6CG5B, SS6E5 A, B, C, SS6E6A, B, SS6E7A, B, C, D

EQ: HOW DO YOU IDENTIFY THE THREE

ECONOMIC SYSTEMS?

LEARNING TARGET: I CAN ANALYZE AND COMPARE

DIFFERENT ECONOMIC SYSTEMS.

Basic Economics

What is Economics?

Economics is the study of how people manage their resources.

The Three Questions

All economics revolves around three simple questions:

1. What to produce?2. How to produce it?3. Whom do I produce it for?

Natural Resources

Natural resources are gifts of nature that are used to make products.

They are limited!

Examples:Plants, Mined Metals, Animals, Oil, Coal,

Minerals, etc.

Production

Production is:

1. How goods are made with resources2. How services are performed

**Production of any sort requires a resource or a combination of resources**

What is the product? What is the service?

What is the product you’re making?CarsShoesPensPaper

You’re still creating and selling something…LandscapingMechanicsDentists

What to produce?

How do I produce it?

How do I make the things or services I want to sell?

If I want to sell shoes I first need to figure out how to make shoes!

As you watch the video, list as many things as you can that went in to making the shoe.

Traditional Economy

1. What is produced?1. What people need to survive

2. How are goods produced?1. Farming, hunting or gathering

3. How do people get products?1. People make their own products or they barter

(trade) with people.

****There is no money involved in a Traditional Economy****

Command Economy

1. What is produced?1. The government decides

2. How are goods produced?1. The government decides

3. How do people get products?1. The government decides

****The government COMMANDS everything****

Market Economy

1. What is produced?1. Whatever people are willing to buy and sell

2. How are goods produced?1. Supply and demand. Producers decide based on

what customers want

3. How do people get products?1. It is determined by how much a person wants to – or

– is able to pay

Mixed Economies

A mixed Economy might use elements of both market and command economics. The U.S. has a “mixed” economy because the government doesn’t decide what and how goods are produced, but it does regulate certain things, like medicine (FDA: Food and Drug Administration.

Some examples are the U.K., Germany, Russia, the U.S.

Mixed Economy

Market Economy

Economic

Systems

PureMarket

PureCommand Mixed Economy

1000

Russia51%

Germany71%

United Kingdom

79%

Economic

Systems

PureMarket

PureCommand Mixed Economy

1000

Cuba28%

Brazil57%

Canada81%

Economic

Systems

PureMarket

PureCommand Mixed Economy

1000

Australia83%

Trade Barrier

Trade Barriers

Countries sometimes set up trade barriers to restrict trade because they want to sell their own goods to their own people. Trade barriers include:

Tariffs, Quotas, and Embargoes

They “hinder” (stop or slow down) global trade.

Tariffs

Tariffs are taxes placed on imported or exported goods. Tariffs cause the consumer to

pay a higher price for an imported item, increasing the demand for a lower-priced item

produced domestically. (at home)

Quotas

Quotas are restrictions on the amount of a good that can be imported into a country.

Quotas can cause shortages that cause prices to rise

Embargoes

Trade embargoes forbid trade with another country.

In the past- U.S. & Russia

Present (but not for long): U.S. & Cuba

Human Capital

Human capital(aka-Labor) include the people with skills

necessary to produce a product or perform a service.

Examples:Lumberjacks, Doctors, Teachers, Lawyers,

Factory Workers, Truck Drivers, etc.

Capital Resources

Capital resources are the tools and machines that humans need to turn

natural resources into final products.

Examples:Chainsaws, Trucks, Factories, Computers, Drills,

Mining Rigs, etc.

Entrepreneurship

Entrepreneurs are those people who come up with the idea for a product or

service and bring the necessary resources together to make it happen.

Basically……..the people with the idea.

Entrepreneurs

Entrepreneurs have 2 characteristics that make them different from the rest of the labor force:

1. innovative (have creative ideas)2. risk taker (use limited resources in an innovative way in hopes that people will buy the product)

It can be several things:Starting your own businessInventing something newChanging the way something was previously done so that it works better

GDP: Gross Domestic Product

GDP = the total amount of final goods and services produced in one year within a country

GDP is a domestic measurement because it measures only what has been produced within the country--this doesn’t include products that

are imported.

It is much better for the economy of a country to produce its own goods and services (this

increases the country’s GDP).

Natural Resources in the Economy

Currency Exchange