econommics

7/29/2019 econommics

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Introduction

Nature & Scope Relevance Scarcity & choice

Science/Art

Positive/ Normative

Basic questions

answered by

economics

Economics-Micro,

Macro

Importance,

limitations of

Microeconomics

Unlimited wants

Limited

resources

Alternative uses

Problem of

choice


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Economic System

Market Economy Command Economy Mixed economy


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Nations must answer 3 basic Economic question:

What goods and services should be produced?How should the goods and services be produced?

For who should the goods and services be produced? The way a nation answers these questions defines theireconomy

How Does An Economy Work?


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All economic systems fall into one of two broad categories:

Market (or Capitalist) System

Command (or Planned) System

No economy can be purely market or purely command

Elements of both economies are found in all systems this

makes all economies mixed

Types of Economic Systems


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No government involvement in economic decisions

The government lets the people answer the three basic economic

questions

What? Customers decide through their purchases

How? This is left up to the individual business

BUT- a business must be profitable

Who? People who have money can buy more this encourageshard work and investments

A Pure Market Economy


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A Pure Command Economy

The Government controls the factors of production and makes allthe decisions The government is responsible for answering thethree economic questions

What? One person ( a dictator) or a group of government officials

(central planning committee) decide what is to be produced

How? The government owns all the factors of production andmakes all the decisions about production

Who? The government decide who receives what is produced in

the economy


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Some government involvement through mandatory laws andregulations that businesses follow Labor Laws, Minimum Wage

The government provides social programs for those who need helpMedicare, welfare

All economies are mixed they are classified based on how much thegovernment is involved in the process

Mixed Economies


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CommandEconomy

Communism

On the far leftbut right ofcommunism

Continuum of Economic Systems

SocialismLeft of center

MarketEconomy

Capitalism

On the farright


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An economic system characterized by private ownership ofbusinesses and marketplace competition

The government is concerned about its people and takes care ofthose who cannot care for themselves

The political system is a democracy with leaders elected by thepeople

The United States and Japan are examples ofa Capitalist Economy

Capitalism


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Increased government involvement in peoples lives and theeconomyThe main goal is to keep prices low for all people and to provideemployment for manyThe government runs key industries and makes economicdecisionsMore social services for all and free or low cost medical careCanada, Germany, Sweden, Australia and Great Britain are allexamples of socialist economies

Socialism


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The government runs everything (Totalitarian government)Only one political party, the Communist party, runs the

governmentAll people able to work are assigned jobs there is virtually no

unemployment

The government assigns housing, schools, and occupationsThere is little to no economic freedom Cuba, North Korea, and

China are examples

Communism


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The breakup of the Soviet Union is the best example of a countrychanging from a Command Economy to a Market EconomyStateowned industries have been privatized(government owned businesses are sold to private citizens)Today even socialist countries are selling some of theirgovernment owned businesses to individuals

Economies In Transition


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THE FOUR TYPES

Economic Systems


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The Four Types of Economic Systems

Four very different types of Economic Systems have

evolved as different societies have placed different

emphasis on different goals and priorities in their

efforts to answer the Three Key Economic Question.


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Traditional Economy Family or

Community based Economic System

System that relies on custom and ritual to

make its choices.

Examples:Tribes

Any Sustenance Economy


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Individual or Consumer

based Economic System

that relies on the

consumption choices of

consumers.Examples:

*The U.S.A.?

*Japan?

Any Capitalist

Economy?

Market Economy


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Command Economy

Centrally Controlled

Economy where the

Government makes all

decisions.Examples:

Cuba

China

Any Communist

Country or Dictatorship


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Mixed Economy

Economic System that

incorporates some

Governmental

involvement into a MarketBased Economy.

Examples:

*The U.S.A.?

*Japan?

*India?

Most ModernEconomies


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Production Possibility Curve (PPC)

Shows maximum combination of output that the

economy can produce using all the availableresources


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Economics & Business

Business Economics: Application of

Economic theory to analyze the problems

faced by a firm in the process of decision

making

econommics

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