Economics Systems

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Economics Systems

• Basics

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WHAT IS ECONOMICS?

• How people earn a living and use resources
• Essentially answers the question of who needs
  and/or uses what resources
• Not always money
• In todays world, a countrys economy is closely
  tied to other countries
• Example world wide depression in 1920s, crop
  failure in Africa

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ECONOMIC ACTIVITIES

• Found in every economy
• Generally seen as money-making activities
• Depending on activity level, location can or
  cannot be important

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ECONOMIC ACTIVITIES
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ECONOMIC SYSTEMS

• Economic activities are found in all different
  types of economic systems
• Type of system can determine wealth of nation
• Three main types of economy
• Subsistence
• Market
• Command

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SUBSISTENCE ECONOMY

• Most basic and traditional economy
• People make goods form themselves and their
  families
• Little surplus
• Little exchange of goods
• Few markets to buy and sell goods
• Found mostly in poorer countries and in rural
  areas

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MARKET ECONOMY

• People choose what to buy and sell
• Uses Free Enterprise, based on supply and demand
• Businesses use competition to determine price but
  also need to make a profit

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MARKET ECONOMY

• Characterized by specialization
• Businesses and regions make goods they can sell
  for highest profit
• Typically found in wealthier countries
• Basis of Capitalist economies

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COMMAND ECONOMY

• Government makes major economic decisions
• Government decides what to produce, where to make
  it and what price to charge
• Basis of Communist governments
• Communist countries tend to be poorer

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ECONOMIC SYSTEMS
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Socialism

• Broad term to say state or collective
  organization of means of production
• NOT communism, but some similar characteristics
• Tend to have large welfare systems, but also high
  taxes
• Found in Northern Europe but declining in
  popularity

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Levels of Development

• Used to explain current economic policy and
  reality in a country or region
• Use certain indicators
• Gross National Product (GNP) total value of
  goods and services that a country produces in a
  year
• Gross Domestic Product (GDP) goods and services
  produced WITHIN the country, usually divided by
  number of people living in the country

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Other Indicators

• Industrialization how widespread machine power
  is in manufacturing industries
• How much energy is used
• How many people work in primary, secondary or
  tertiary economic activities
• Size and quality of transportation and
  communication areas

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Developed Countries

• High levels of industrialization
• High standards of living
• High per-capita GDP
• High literacy and education rates
• Life expectancy high, death rate low and birth
  rate tends to be low
• Examples US, Japan, Western Europe

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Developing Countries

• Low standards of living
• Low levels of economic production
• Low per-capital GDPs
• Limited education
• Found mainly in South America, Africa and SE Asia

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Middle-Income Countries

• Middle per-capita GDPs
• Have developed and developing features like
  large, modern city but subsitant rural farming
• Usually migration from rural to urban areas
• Some have quickly rising incomes
• Examples India, Mexico, Brazil, Thailand