systems of economicsww2.d155.org/clc/tdirectory/pcraig/shared documents/ch. 2...govt. makes key...
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I N T R O D U C T I O N T O B U S I N E S S C H A P T E R 2
ECONOMIC SYSTEMS
I c a n d e s c r i b e t h e 3 b a s i c e c o n o mi c q u e s t i o n s e a c h c o u n t r y mu s t a n s w e r t o ma ke d e c i s i o n s a b o u t i t s r e s o u r c e s I l i s t t h e c h a r a c t e r i s t i c s f o r t h e e c o n o mi e s .
•TARGETS
ECONOMICS
The Study of how consumers get their needs and wants by making choices.
Goal of Economic System: To provide citizens with their needs!
3 Basic Economic Questions
What should be produced?
How should it be produced?
Who should share in what is produced?
Economic Systems
Definition How societies distribute resources
Market System
All decisions are made in marketplace.
Marketplace is g & s are bought and sold. (internet, flea market, mall, stand alone store etc.)
Market System
Characteristics Consumers can own what they can afford Business owners decide how to run businesses Consumers make their own decisions, live? Buy? Etc. Competition. Profit!!!
NO GOVERNMENT INTERVENTION NO COUNTRY IS A PURE MARKET ECONOMY
Price, Supply, and Demand
In a market economy there is a relationship between price, supply, and demand. Price - the amount of money given or asked for when goods
and services are bought or sold. Supply – the amount of goods and services that producers will
provide at various prices. Demand – the amount or quantity of goods and services that
consumers are willing to buy at various prices.
Supply and Demand Continued
Supply and Demand interact with each other.
Equilibrium price is the point at which the quantity demanded and the quantity supplied meet.
Supply and Demand…
Law of Supply-Suppliers are willing to supply more
at a higher price than they are at a lower price.
Law of Demand- Consumers are willing to buy more at a lower price than they will buy at a higher price.
Market System
Advantages Incentives to work hard if you can make more money Competition-- better, cheaper products Constant demand for new goods and services encourages
entrepreneurship
Disadvantages Owners and producers reap the most rewards Unskilled people can’t afford basic needs CEO’s make 500 times what a blue collar worker makes A few companies can control the market and manipulate prices
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Command Systems
Definition Central authority makes key economic decisions Characteristics: Govt. decides the 3?s Govt. owns all the resources and businesses. Little choice of what to buy Many goods not available. Prices are controlled by the govt.. No competition Skilled workers earn same $ as unskilled.
Socialism
Govt. owns major resources Airlines, steel, oil, public transportation
Some privately owned businesses Govt. makes key economic decisions (not all) Examples:
Communism
Govt. makes all economic decisions Govt. controls all resources Govt. owns all business Examples:
Mixed Economy
Definition Combination of a market and a command system.
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