To what extend do different economic systems affect

quality of life?

To what extend do different economic systems affect

quality of life?

Chapter 6Chapter 6

STOP AND THINK?STOP AND THINK?

We are caught in an inescapable network of mutuality, tied in a single garment of destiny.

Whatever affects one directly, affects all directly Martin Luther King Jr.

Turn and Talk –

Do you believe this to be true or untrue, why?

Provide an example(s) to support your decision?

WARNING! IDEAL SYSTEMS????

When referring to the Economics Systems in

this unit, we are discussing theories and ideal

situation. No country actually has a pure

model as seen by recent current events.

In 2009, Canada and the United States both experienced a major recession. Canada, he mixed economy, opted for months of no-government regulations, (Shift Right) almost resulting in the fall of the government while the USA created a multi-billion dollar Stimulus Package. (Shift Left)

Economics, Systems and QOL

Economics is the study of the production, distribution and consumption of goods and

services.

Economic systems are the way a society organizes the production, distribution, and

consumption of goods and services.

Quality of Life is measure of personal and collective well being

Microeconomics vs. MacroeconomicsMicroeconomics vs. Macroeconomics

Microeconomics Macroeconomics

What is it? Is a branch of economics that studies how individuals, households and firms make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold.

Bade, Robin; Michael Parkin (2001). Foundations of Microeconomics. Addison Wesley Paperback

Involves the "sum total of economic activity, dealing with the issues of growth, inflation and unemployment, and with national economic policies relating to these issues“

Colander, David. Microeconomics. McGraw-Hill Paperback, 7th Edition: 2008.

What are examples of it in our lives?

What will I buy? - Market behavior of individual consumers

Inflation, interest rate, employment & unemployment

ScarcityScarcity

• The basic economic problem that rises because people have unlimited wants but resources are limited. These resources are: land (materials), labor (workforce) and capital (money).

• People must make choices between different items because the resources necessary to fulfill their wants are limited. These decisions are made by giving up one want to satisfy another. (Opportunity Cost)

Economic Systems

An economic system is loosely defined as country’splan for its services, goods produced, and the exactway in which its economic plan is carried out. Ingeneral, there are three major types of economicsystems prevailing around the world. Market Economy, Planned Economy and Mixed Economy.

Investorpedia, http://www.investopedia.com/terms/s/systems.asp

Market Economy In a market economy, national and state governments play aminor role. Instead, consumers and their buying decisionsdrive the economy. (example: United States)

Market decisions are mainly dominated by supply anddemand. The role of the government in a market economy isto simply make sure that the market is stable enough tocarry out its economic activities properly.

Market economies aim to reduce or eliminate entirely subsidies for a particular industry, the pre-determination ofprices for different commodities, and the amount ofregulation controlling different industrial sectors.

Planned Economy Command economy. The most important aspect of this type of economy is that all major decisions related to the production, distribution, commodity and service prices, areall made by the government. (Former Soviet Union, Cuba)

The planned economy is government directed, and marketforces have very little say in such an economy.

On the other hand, a planned economy aims at using allavailable resources for developing production instead ofallotting the resources for advertising or marketing.

Mixed Economy A mixed economy combines elements of both the plannedand the market economies in one cohesive system.(Example: Canada)

This system prevails in many countries where neither theGovernment nor the business entities control the economicactivities of that country both sectors play an important rolein the economic decision-making of the country.

Mixed economies arise in societies that seek to balance awide range of political and economic views.

Supply and DemandEach specific good or service will have its own supply and

demand patterns based on price and personal preference. If people demand a good and are willing to pay more for it, producers will add to the supply. As the supply increases, the price will fall given the same level of demand.

Ideally, markets will reach a point of equilibrium wherethe supply equals the demand for a given price point; at this point, consumer utility and producer profits are maximized. 

Investorpedia, http://www.investopedia.com/terms/s/supply.asp

Equilibrium Point

Ideally, markets will reach a point of equilibrium where the supply equals the demand for a given price point; at this point, consumer utility and producer profits are maximized. 

Competition

Competition is about producers striving to get

consumers to buy their products.

In economics competition = rivalry among producers to sell products to consumers.

Competition

As of 2004, which company was doing a better job of competing, how do you know this?