Different World Economies

1
Different World Economies

• Economics 11 Chapter 2

2
Descriptive Overview

• In this lesson, students will be exposed to
  four types of world economies. They will also
  learn the historical background that led to the
  formation of those economies, specifically
  command and mixed economies.

3
Lesson Objectives/Goals

• Describe and compare the economic systems
  predominate in the world today.
• Compare and contrast traditional, command and
  market economies.
• Explain how mixed economies are a combination of
  other economic systems.

4
Terminology/Vocabulary

• Capitalism (First World)
• Command Economy (Second World)
• Traditional Economy (Third World)
• Market Economy
• Mixed Economy
• Free Enterprise

5
Adam Smith

• Adam Smith (1723-1790-Scotland) is considered
  the father of modern economic theory and
  capitalism. Best know for the concept of the
  Invisible Hand of capitalism that brings
  benefits to all of society through the self
  serving profit motive (innovations like those of
  Steve Jobs and Bill Gates)

6
Karl Marx

• Karl Marx (1818-1883 Germany)
• Co-author with Freidrich Engels of
• The Communist Manifesto which popularized the
  theories that led to modern 20th Century
  communism in Russia, China, North Korea, Vietnam
  and Cuba.

7
Traditional Economies

• Traditional economies are found in rural,
  non-developed countries
• Some parts of Asia, Africa, South America and the
  Middle East have traditional economies
• Customs govern the economic decisions that are
  made
• Modern Technology is not used in traditional
  economies.

8
Traditional Economies

• Farming, hunting and gathering are done the same
  way as the generation before
• Economic activities are usually centered toward
  the family or ethnic unit (tribal clans)
• Men and Women are given different economic roles
  and tasks

9
Command Economies

• The government or other central authority makes
  decisions and determines how resources will be
  used (quotas/five year plans)
• Change can occur relatively easily because the
  govt. forces it.
• There is little individual freedom or private
  property
• There is no competition
• Businesses are not run to create a profit but
  merely to provide services/goods
• Social Democratic (NDP) Socialism (Sweden)
  Communism (extreme case USSR, CHINA, CUBA)

10
Command Economies

• Consumers have few choices in the market place
• Factories are concerned with quotas
• Shortages are common because of poorly run
  factories and farms (bread lineups in USSR were
  common)
• The government dictates the job in which you work
• From each according to his ability, to each
  according to his need (or needs) Karl Marx

11
Command Economies

• The government sets the prices of goods and
  services
• Examples of command economies Cuba, North Korea
  and the Peoples Republic of China

12
Market Economies

• Resources are owned and controlled by
  individuals-private property is the norm
• Economic decisions are made by individuals
  competing to earn profits-The Profit motive
  decides the 3 questions
• Individual freedom is considered very important
• Economic decisions are made by the basic
  principals of supply and demand
• Profit is the motive for increasing work rather
  than quotas

13
Market Economies

• Also called capitalist economies
• Laissez Faire- to leave, to do government
  stays out of the economy and does not regulate it
  at all.
• There are many economic freedoms
• There is competition among businesses
• Competition determines price which increase the
  quality of the product

14
Mixed Economies

• Government and individuals share the decision
  making process (CANADA, France AND Britain even
  the USA when Democrats are in power)
• Government guides and regulates production of
  goods and services offered
• Individuals own means of production
• Protects consumers and workers from unfair
  policies (govt regulated economies) such as
  those that caused the 2008 Great Meltdown in the
  USA.
• Most effective economy for providing goods and
  services but not individual wealth (Americans are
  usually far richer or far poorer than Canadians
  and Brits).
• Why is Canada a mixed Economy? Why

15

Review

• Four Types of Economics
• Traditional Economies
• Command Economies
• Market Economies
• Mixed Economies