Comparing Economic Systems

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Comparing Economic Systems

• Section 5.1

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What is Economics

• Economics
• The social science that examines how societies
  use scarce resources to produce and distribute
  goods and services that satisfy peoples wants
  and needs.
• -or-
• Economics is the study of choices about using
  resources.

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Question

• Why can understanding basic principles of
  economics help you make better decisions as a
  consumer?

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Economics

• A person who studies economics is called an
  economist.
• The study include two branches
• Macroeconomics
• Microeconomics

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Macroeconomics Microeconomics

• Macroeconomics Economics on a national and
  global scale, concerned with the economic
  decisions made by governments.
• Microeconomics focuses on economic decisions
  made by individual people and businesses.

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Need for Economic Systems

• Economic system
• The way a society uses resources to satisfy its
  peoples needs and wants.

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Economic Resources

• What are economic resources?
• Land
• Natural resources
• Power
• Communication
• Transportation systems
• Productive workers
• Money

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Scarcity and Opportunity Cost

• Resources of a society are limited, but peoples
  wants are unlimited.
• Any examples?
• Opportunity cost
• The value of the best alternative given up.
• Purchase and MP3 player or a Game Counsel

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Three Basic Questions

• What goods and services will be produced?
• How will these goods and services be produced?
• Who should share the goods and services that are
  produced?
• These questions will answer what kind of economy
  one has and what, how, and for whom will it be
  produced from/for.

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Types of Economies

• Traditional (subsistence) Economy
• Decisions about what to produce, how, and for
  whom are based on traditional customs and beliefs
  of the society.

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Types of Economies

• Command (Controlled) Economy
• Decisions about what to produce, how, and for
  whom are decided by a central government.

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Market (capitalist) Economy

• Decisions about what to produce, how, and for
  whom are decided by individuals acting in their
  own self-interest.
• They decide fore themselves what goods to make
  and what services to offer.
• Essential characteristicexistence of free
  markets.

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Types of Economies

• Mixed Economy
• A combination of the command and market economic
  systems.
• (U.S.)

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HOMEWORK