Standard:12e2.3

Explain the roles of property rights, competition and profit in

a market economy

ESLR-Analytical Thinkers

Collaborative Workers

Effective Communicators

Chapter 2 Section 1 Terms Traditional economy Command economy Market economy Self-interest Incentive Mixed economy Authoritarian socialism Capitalism Democratic socialism

Objectives

Explain how the three basic economic questions are answered in traditional, command, and market economies

Describe the roles of self-interest and incentives in a market economy

Describe the types of mixed economies that exist today

Your school

Which factors influence economic

decisions in your school? Who makes these decisions? What are these decisions based on?

The United States

Which factors influence economic

decisions made in your country? Who makes these decisions? What are these decisions based on? Would these answers be different in

other countries?

Pure Economic Models

Traditional Economies- tradition and customs answer the 3 basic questions:“For Whom to Produce” “What to produce”? “How to Produce”

Command- government officials, central planners

Market- individuals, free exchange of goods and services.

Adam Smith

The market is driven by self-interest. People work to fulfill their needs and wants.

The invisible hand should regulate the economy.

Also known as laissez-faire economics

How do we decide what is in our self-interest?

The Market offers incentives – these encourage you to act a certain way.

Sometimes incentives are rewards, sometimes punishments.

Can you think of an incentive that

brought you to school today? A

negative incentive?

All economies today are “mixed”

Mixed economies blend the elements of traditional, command and market types

They are:

Authoritarian Socialism

Capitalism

Democratic Socialism

Authoritarian Socialism

Also known as Communism Government owns or controls nearly

all the factors of production

REVIEW- What are the 4 factors of production?

Karl Marx Felt that life was a

struggle between the bosses (bourgeoisie) and the workers (proletariat).

Workers should run things and split the profits, they should get rid of the bosses

Capitalism

Individuals own the factors of production They answer the basic economic

questions Government does play a role. They provide services like health care and defense. Government also regulates industry. For

example, safety standards at your job.

United States, Canada, Mexico, Japan are Capitalistic countries

Democratic Socialism

Falls in between Communism and Capitalism

Government owns SOME of the factors of production such as utilities

Individuals control the rest of the factors of production, there are incentives and choice just like in Capitalism

Sweden, Poland, France

Smith vs. Marx

In teams of 3-4 Divide the 2 readings “The Wealth of Nations” and “Das Kapital”

Each team member should read and summarize ½ of an article.

All team members discuss and answer Question #2 on each reading.