Economic Systems and Decision Making Insights

honors Economic Systems and Decision Making Chapter 2

Discussion What is one tradition that Americans follow in society? What is the traditional tipping percentage? How many students will carry on a family members occupation? Does one family member by habit or tradition take out the trash or wash dishes or babysit?

Economic Systems The survival of any society depends on its ability to provide food, clothing, and shelter for its people. All societies have something else in common. They have an economy or economy system an organized way of providing for the wants and needs of the people

Bartering Bartering - - video video 1. What commonly used economic resource does cabbage replace? 2. What conditions in the commercial retail sector of the Soviet economy forced these Russians to use kapusta to get the goods they needed and wanted? 3. Under what economic conditions does swapping goods for other goods, or bartering, make sense? What other events or economic conditions, aside from the one shown in the video, might make bartering an economic necessity?

Foldable Activity Make a foldable on the three economic systems Include the following information Advantages and Disadvantages of each system How are Basic Economic Decisions made in each of the systems? Examples of Societies (at least 2) for each system Rubric: 20 Points each system 60 points total 5 points for how each system makes decisions 15 points total 5 points for examples of each society 15 points total 10 points for following instructions 10 points total Total point value of activity 100 points counts as a classroom assignment

Mixed Economies Lesson 2

Mixed Economies Economic systems where tradition, command, and markets each answer some of the WHAT, HOW, and FOR WHOM questions.

Why do mixed economies exist? When people from one type of economy comes in contact with other cultures Economy s can change when people are unhappy with the way their economy is working (Great Depression)

Traits of a Mixed Economy The amount of control depends on which economic system is favored. The government controls large industries, while private individuals control small businesses. Citizens are taxed heavily to provide all citizens a social safety net such as welfare, free university tuition and free health care.

Cont. Property is controlled by both the government and private individuals. Workers tend to be somewhat less productive than those in market economies, but more productive then those in command economies. Consumers generally have a wide variety choices.

Examples of a Mixed Economy In France health care is free, university costs very little if you get in (many do not) and taxes are high. However, there are also private industries based out of France like Air France and Peugeot. In United Kingdom health care is free, university is cheap, but citizens can purchase private health insurance and attend private universities if they choose.

Examples of a Mixed Economy The United States is not totally a market economy. It is a mixed economy. Example : The economy of the United States is based on private enterprise. However, some industries (for example, power companies and railroads in some areas) are under collective ownership.

Criticism of Mixed Economies Criticism of Mixed Economies Critics of mixed economies claim that they often result in unproductive workers because there is not as much incentive to work hard as there is in a market economy. As a result mixed economies often suffer from higher unemployment rates and lack the same number of entrepreneurs as market economies.

Criticism of Mixed Economies Criticism of Mixed Economies Mixed economies often must raise taxes in order to sustain all of the social services such as welfare, free health care, low cost university education and pension systems for the elderly which can lead to a stagnant economy. In essence, critics claim that mixed economies enable irresponsible behavior.

Advantages of a Mixed Economy 1. Provides assistance for those who need it (young, old, sick, disabled) 2. Voters can use their power to vote to affect the What, How, and For Whom decisions (consumers hold the power and are flexible) 3. Grow faster

Disadvantages of Mixed Economies 1. Mixed economies tend to provide more goods and services, but the costs of these benefits can be expensive 2. If the country has an economic downturn taxes may decrease and some of the benefits may be limited

Which economic system is best? Which economic system is best? The market system has proven to be best because it promotes the goals of growth, freedom, & efficiency. Citizens are free to own their own property and use it in the most efficient and profitable way. Command and traditional systems sometimes offer more security but are not nearly as strong in efficiency, growth, freedom, and environmental quality.

The Global Transition to Capitalism Lesson 3

Why Capitalism? Capitalism is the most powerful engine for generating wealth It has improved nearly everyone s standard of living

Problems of Transition Privatization the conversion of state owned factories and other property to private ownership -Important because people tend to take better care of something that they own -some countries used Vouchers Loss of Political Power Responding to new incentives Understanding the cost (like high unemployment or social unrest)

Lesson 2 & 3 Activity Review Complete the following chart How governments promote economic growth in capitalist and transitional countries (use key terms) Country Russia China Chile Japan South Korea Turn in for a grade

Countries and Regions in Transition In Russia, the decades-long transition to capitalism has resulted in the current market-based economy, with the exception of government-controlled energy, natural resource, and defense-related industries. After the failure of the Great Leap Forward, China was influenced by successful market economies in Asia and today is undergoing some privatization and other capitalistic endeavors.

Cont. In Latin America, socialism still exists in Venezuela and Argentina, but Chile has made the transition to capitalism. After the Soviet Union collapsed, many Eastern European countries transitioned to capitalism, including Poland, Hungary, the Czech Republic, and Slovakia. Compared to the U.S. government, the Japanese government is much more involved in the day-to-day activities of the private sector.

Cont. By opening its markets to world trade, South Korea has progressed from one of the poorest countries in Asia in the mid- 1950s to a leading producer of electronics and automobiles today. The government in Singapore has focused on a few select industries, pouring money and resources into pharmaceuticals, medical technology, and financial and high-tech industries. Taiwan has always depended on economic planning and was one of the early economic powers in Asia, but its centralized planning may hamper future economic growth.