economic systems
TRANSCRIPT
Economic SystemsEconomic Systems
Chapter 2Chapter 2
What will you learn What will you learn today?today?
1.1. Advantages and disadvantages of Advantages and disadvantages of traditional, market, and command traditional, market, and command economieseconomies
2.2. Characteristics of market, traditional, Characteristics of market, traditional, and command economiesand command economies
3.3. Economic system of another countryEconomic system of another country
3 Basic Questions3 Basic Questions
1.1. What to ProduceWhat to Produce
2.2. How to ProduceHow to Produce
3. For Whom to Produce3. For Whom to Produce
Traditional Traditional
Answer questions based on ritual or Answer questions based on ritual or customcustom
““That’s the way we have always done it ville”That’s the way we have always done it ville”
Based on traditions of elders/ancestorsBased on traditions of elders/ancestors
Traditional ExamplesTraditional Examples
What to Produce?What to Produce? Megalith/StonehengeMegalith/Stonehenge
Traditional ExamplesTraditional Examples
How to Produce?How to Produce? Ritual/pre-modern Ritual/pre-modern
JapanJapan
Traditional ExampleTraditional Example
For Whom to Produce?For Whom to Produce? Potlatch Guests/Northern Pacific Native AmericansPotlatch Guests/Northern Pacific Native Americans
TraditionalTraditional
AdvantagesAdvantages Everyone knows their Everyone knows their
rolerole Stable and Stable and
predictablepredictable
DisadvantagesDisadvantages Discourages new Discourages new
ideasideas StagnationStagnation Lower standard of Lower standard of
livingliving
Command EconomyCommand Economy
Central authority makes What, How, and Central authority makes What, How, and For Whom decisionsFor Whom decisions
Government determines how resources Government determines how resources are usedare used
““We Do What We’re Told Ville”We Do What We’re Told Ville”
CommandCommand
What to produceWhat to produce During the rule of Mao Zedong – Mao suitDuring the rule of Mao Zedong – Mao suit
CommandCommand
How To ProduceHow To Produce Manual LaborManual Labor 1930s1930s Canal between White and Baltic SeasCanal between White and Baltic Seas Too narrow and shallow for shipsToo narrow and shallow for ships
CommandCommand
For Whom to For Whom to ProduceProduce Ancient Egypt = KingAncient Egypt = King- TombsTombs- Wooden hammer and Wooden hammer and
metal chisel to dig metal chisel to dig tomb into mountaintomb into mountain
CommandCommand
AdvantagesAdvantages Little uncertainty about jobLittle uncertainty about job Provide education, and Provide education, and
healthcare at no cost, but healthcare at no cost, but minimal amountsminimal amounts
DisadvantagesDisadvantages Does not meet wants of Does not meet wants of
consumerconsumer No incentive to work, just No incentive to work, just
fill quotafill quota Requires large decision Requires large decision
making bureaucracymaking bureaucracy Not flexible with day to Not flexible with day to
day crisisday crisis No rewards for initiativeNo rewards for initiative
MarketMarket
People and firms in their own best People and firms in their own best interests decide on the What, How, and interests decide on the What, How, and For WhomFor Whom
Consumers not just producers decide Consumers not just producers decide what to producewhat to produce
MarketMarket
What to produceWhat to produce Beanie Babies!Beanie Babies!
MarketMarket
How to ProduceHow to Produce 1900s1900s Henry FordHenry Ford Assembly LineAssembly Line
MarketMarket
For Whom to For Whom to ProduceProduce Broad MarketBroad Market
MarketMarket
AdvantagesAdvantages Individual freedomIndividual freedom Small degree of Small degree of
government interferencegovernment interference Decentralized decision Decentralized decision
makingmaking Plethora of goods and Plethora of goods and
servicesservices High degree of consumer High degree of consumer
satisfactionsatisfaction
DisadvantagesDisadvantages Rewards only productive Rewards only productive
resources: Does not resources: Does not provide for people too provide for people too young, too old, or too sickyoung, too old, or too sick
Does not produce enough Does not produce enough public goodspublic goods
High degree of uncertaintyHigh degree of uncertainty Market failuresMarket failures
CompetitiveCompetitive Adequate infoAdequate info Freely moving resourcesFreely moving resources