EconomicProcessandSystems

5.2-5.3

BellRingerPage:59

Nameyourfavoriteclothingstoreandexplainwhyyoulikeitsomuch.1.Whatisthestore’sspecialty?2.Canspecializinghurtastoretoomuch?

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LearningObjectives:Iwillbeableto…

Examinetheexchangeofgoodsandservicesandtheissuesaffectingprofit.

Listandanalyzethefourtypesofeconomies.

Debatecommandandmarketeconomies.

Market

Anorganizedsystemwhereproducersandconsumersexchangegoodsandservices.

1.Howdidpeopleusetoexchangegoodsandservicesbeforeacurrencywasused?

Currency

Agovernmentissuesmoneyintheformofpaperbillsandmetalcoins.

Differentcountriesusedifferentcurrencies.Inordertotradeeachcountrymustestablishavaluefortheircurrenciesandasystemforexchangingdifferentcurrencies.

Profit

Themoneyleftoveraftersubtractingthecost ofdoingbusiness.LaborRentMaterials

Companieswanttodecreasecost andincreaserevenues.

Revenue=themoneyearnedaftersellinggoodsorservices.

NonprofitOrganizations

Businesslikeinstitutionsthatdonotseektomakeaprofit.ChurchesMuseumsHospitals

Competition

Profitsareaffectedbycompetition inthemarketplace.

Competition=thestruggleamongproducersforconsumerbusiness.

Companiescompeteby…1.loweringprices2.specializing3.advertising

Specialization

Companiescanincreasetheirprofitandrevenuebyconcentratingonalimitednumberofgoodsorservices.• HalloweenStores• Scentsy Stores

HealthyEconomy

Ahealthyeconomygrows ascompaniesproduceandsellmoregoodsandservices.

Whenpricesincreaseovertime,thisisreferredtoasinflation.

***Economiesdonotgrowforever!

Economicactivitiesfallasdemandfallsleadingtounemployment.Ifthisdeclinelastsformorethan6months,itisreferredtoasarecession.

ChecksforUnderstanding

1. Howdoescompetitionaffectproducersandconsumers?2. Howdoesinflationaffectprices?3. Howdoesrecessionaffectprices?4. Whatisthedifferencebetweenprofitandrevenue

EconomicSystems

Everysocietyhasaneconomicsystem.

4BasicEconomicSystems1.Traditional2.Market3.Command4.Mixed

TraditionalEconomy

• Decisionsbasedoncustomandhabit.

• Wantsandneedsaresatisfiedthroughhuntingandfarming.

• Donotwanttochangetheirbasicwayoflife

• Uncommonintoday’ssociety

MarketEconomy

• Individualproducersandconsumersmakeeconomicdecisions.• Referredtoascapitalismorfreemarket• Encouragesentrepreneurshipbygivingpeopleeconomicfreedom.• Really…nosuchthingasapuremarketeconomy.

CommandEconomy

• Centralgovernmentmakesalleconomicdecisions.• Alsocalledacentrallyplannedeconomy.• Individualproducersandconsumersdonotmakebasiceconomicdecisions.• Nosuchthingasapurecommandeconomy.

MixedEconomy

• Mostsocietieshavemixedeconomieswithvaryinglevelsofgovernmentcontrol.• Combineselementsoftraditional,marketandcommandeconomicsystems.• Governmentmakessomeeconomicdecisions.(U.S.A.andAustralia)• Passinglawstoprotectconsumerrights.• Governmentstaxcompaniesandinfluenceeconomicgrowth.

• Governmentownsandcontrolsmostbusiness.(N.KoreaandCuba)

ChecksforUnderstanding

1. Whatarethedifferencesamongtraditional,commandandmarketeconomies?

2. Whataretheadvantagesofafree-marketsystemusedintheUnitedStates?

3. Doyouthinkgovernmentinvolvementintaxingconsumersandproducersisnecessaryinamixedeconomy?

• https://www.youtube.com/watch?v=B43YEW2FvDs

“DebateandDefend”BrainstormPage58

Completethe“DebateandDefend”brainstormactivityandbepreparedtodefendanddebateeitheraCommandEconomyorMarketEconomytomorrow.