lesson 3 economic systems - duke
TRANSCRIPT
The Three Key Economic Questions1.
1. What goods and services should be produced?
2. How should goods and services be produced?
3. Who consumes goods and services?
Command Economy (Centrally Planned)
PROS
• Low unemployment.
• Less class distinction.
• Basic needs are met.
CONS
• Government owns the factors of production.
• Little consumer choice.
• Quantity not quality.
• No incentive for the workers.
• Sacrifice individual freedoms.
Incentives: an expectation that encourages people to behave a certain way.
List two incentives in your life.
1.
2.
Market Economy (Free Market)PROS
• Individuals own factors of production.
• Voluntary exchange.
• Encourages growth and specialization.
• Incentive/competition-profit.
CONS
• Large gap in the distribution of wealth.
• Booms and busts in the economy.
• Does not provide for things the market does not address.
• Ex. National Defense, Police, School, Parks.
The Invisible Hand
Mixed Economy
PROS• Government regulations
= consumer protection. FDA
• Property rights, patents• Taxes: provide social
benefits.• National Defense,
Police, Schools, Parks.• Taxes: “Safety net” for
those who cannot provide for themselves.
CONS• Too much regulation
inhibits growth.
• Encourage social dependency on government programs.
• When, where, and what extent should government step in.
Checking For Understanding(Command, Market, or Mixed)
• The regulations government provide can be looked at as a positive because they can protect the consumer.
Mixed
The Invisible Hand: Self-interest and competition work together to regulate the marketplace. Adam Smith, The Wealth of Nations 1776
* In a sales transaction, buyers and sellers consider only their self-interest, which is the motivating force behind the free market.
Buyers
Incentive
Sellers
“Get a good deal” “Make Profit”
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