ECONOMICS IN SOUTHWEST ASIA

SS7E5 The student will analyze different economic systems. SS7E6 The student will explain how voluntary trade benefits buyers and sellers in Southwest Asia

SS7E7 The student will describe the factors that cause economic growth and examine their presence or absence in Israel, Saudi Arabia and Iran

ELEMENTS

Compare how traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce.

Explain how most countries have a mixed economy located on a continuum between pure market and pure command.

Compare and contrast the economic systems in Israel, Saudi Arabia and Turkey Explain how specialization encourages trade between countries. Compare and contrast different types of trade barriers, such as tariffs, quotas,

and embargos Explain the primary function of the Organization of Petroleum Exporting

Countries (OPEC) Explain why international trade requires a system for exchanging currencies

between nations. Explain the relationship between investment in human capital (education and

training) and gross domestic product (GDP). Explain the relationship between investment in capital (factories, machinery,

and technology) and gross domestic product (GDP). Explain the role of oil in these countries’ economies Describe the role of entrepreneurship

ESSENTIAL QUESTIONS

How do the traditional, command, and market economies of Southwest Asia countries answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce?

Where are the economic systems of Southwest Asia located on a continuum between pure market and pure command?

What are the similarities and differences between the economic systems in Israel, Saudi Arabia, and Turkey?

How does specialization encourage trade between countries in Southwest Asia?

How are tariffs, quotas, and embargos barriers to trade in Southwest Asia?

What is primary function of the Organization of Petroleum Exporting Countries (OPEC)?

Why does international trade require a system for exchanging currencies between nations?

What is the relationship between investment in human capital (education and training) and gross domestic product (GDP)?

What is the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP)?

What is the role of oil in economies of the countries of Southwest Asia?

What is the role of entrepreneurship in Southwest Asia?

What is an Economic System?

Every society, whether a country, state, city, town, has an economic system

An economic system is how a society organizes the production, consumption and distribution of goods and services

Systems of Economy

There are three main types of economic systems Traditional

Found mostly in societies that are based on farming People produce enough goods to survive

▪ Either by farming, gathering or hunting Make their own clothes and tools Anything extra is usually traded

Command Government controls what is produced, how things are produced Government has all the resources and dictates what is to be made and

who gets the product▪ Decisions made on wealth, class status or by position in a waiting line

Market Based on what the consumers of the country want to buy and sell Supply and demand determines what is produced and how it is produced People may own their own businesses Who gets a product determines how much they can afford to buy it

Countries with Different Systems

NORTH KOREA

PAKISTAN

UNITED STATES OF AMERICA

The Idea of Mixed Economy Most countries in the

world have a mixed economy Most are in between

command and market economies

Because of growing populations, citizens acquiring more rights, the addition of resources and government changes, countries have moved towards mixed economies

Examples of countries with mixed economies United States England France South Africa

Economic System of Saudi Arabia

Saudi Arabia started as a traditional economy in the 1930s, but after oil was discovered the economy became a command economy. The government controls most of the oil and it funds education, defense, transportation and health. In the 1980s, the country would add power and natural gas as businesses, now having a mixed market economy, with a large part of the income coming from private businesses, but oil still brings in most of the income. Saudi Arabia is training young entreupreners to start their own businesses

Economic System of Israel

Israel has a mixed market economy, but has issues with immigration and fighting with other countries. The government and private companies control the economy, but the country has few natural resources, which causes them to import many goods. A lot of workers come to Israel to work in service (tourism, banking, retail). Israel also grows its own food and has to irrigate for water. The United States helps out the country in terms of providing economic aid. Israel also gets income from mining, manufacturing and diamonds

Economic System of Turkey

Turkey started with a command economy back in the 1920s. The government invested in dams, ports, railways and roads and developed steel and weapons production industries. Turkey now has a mixed market economy, with a large farming and textile industry. Turkey has begun to have many private businesses enter the country and is a big trader with Western Europe. Because of trade with Europe, they are pushing to join the European Union, which would boost their economy through loans and funding.

Specialization

The act of concentrating on a limited number of goods and activities to trade

Helps people and companies use resources more efficiently

Allows for increased production and consumption of goods and services

Types of Trade Barriers

Tariffs Taxes on imported goods

Quotas Restrictions on the amount of a good

that can be imported into a countryEmbargos

Forbids or disallows trade with other countries

The Impact of OPEC

OPEC stands for the Organization of Petroleum Exporting Countries

12 member organization Iran, Iraq, Saudi Arabia and Kuwait are

members from SW Asia OPEC seeks to unify petroleum prices so

the oil market is stable worldwide as well makes policies on oil trade and production Has control over prices, which effects prices of

gas

Currency Exchange in Southwest Asia

Currency is the type of money used to exchange or purchase goods

The system of exchanging money internationally is called foreign exchange

Currency in SW Asiao Israel - Israel shekelo Saudi Arabia - Riyalo Jordan - Dinaro Turkey - Lirao Afghanistan - Afghanis

Capital and Human Capital vs. GDP

Human Capital The knowledge and

skills that allow for people to make goods and services for society

Factors▪ Training and education

Capital Things that are used to

make other goods Factors▪ Factories, technology and

machines

Gross Domestic Product (GDP) The total market value

of the goods and services produced by a country’s economy during a specific period of time

Used by economists to determine how healthy or unhealthy a country is

Human Capital, Capital and GDP

The relationship between human capital and GDP is if a country has good source of human capital, the GDP tends to be higher

The relationship between capital and GDP is the more capital in a country, the healthier the country is in the long term

The Impact of Oil on SW ASia

Oil is the most important natural resource in Southwest Asia

Oil affects countries differently, depending on their access to it

The countries that have the most oil are usually the controlling and powerful countries in the region

Entrepreneurship

An entrepreneur is someone who has an idea for a good or service and takes risks to produce the good or service

Entrepreneurs know of the risks before the product is produced

Entrepreneurs help the economy to grow based on borrowing funds, use capital and human capital and natural resources

Southwest Asia is mixed with it’s entrepreneurship, as countries are pushing to grow private businesses