Economic Systems Conclusion Obj: Understand strengths and weaknesses of economic systems ES: C-4...
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Economic Systems Conclusion Obj: Understand strengths and weaknesses of economic systems ES: C-4 Explicitly assess information and draw conclusions Agenda: 1. Economic System Spectrum 2. Marginal Analysis Demonstration
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Transcript of Economic Systems Conclusion Obj: Understand strengths and weaknesses of economic systems ES: C-4...
Economic Systems Conclusion
Obj: Understand strengths and weaknesses of economic systems
ES: C-4 Explicitly assess information and draw conclusions
Agenda:1. Economic System Spectrum2. Marginal Analysis Demonstration
Command vs. Market
Remember, an economy is simply the mechanisms by which a central body enforces decisions about the allocation of their factor of production (WHO? WHAT? HOW?)• Command-publically owned industry and a central
authority is making decisions about production and consumption
• Market—production/consumption are a result of decentralized decisions from firms and individuals
***Who is answering the 3 key questions…
Failures: Command
• Public taste’s are difficult to predetermine– Soviet Union routinely made incorrect predictions about
what the people would want/need, thus,– Their allocation of crucial raw materials was wasteful…
shortages and inflations ran rampant• Lack incentives!!! (rewards or punishments for certain
choices)– Imagine if you were a manager of a restaurant…
• No property rights---these drive people to produce things of value and put resources to their best possible use
Failures: Market
• Based on infinite growth, production, consumption
• All private individuals NEED to uphold morality and make responsible decisions (pollution and waste)
• Requires NO oversight from any government agency
• Markets can fail! When they do, how do they recover without complete devastation first?
The Economic System Spectrum
0Command
10 Market
• These markets are imperfect, completely theoretical, and could never exist in the real world• The strongest economic systems simply have the
best mechanisms in place to achieve the goals society deems most essential
The Economic System Spectrum
0Command
10 Market
United States???
The Economic System Spectrum
0Command
10 Market
China???
The Economic System Spectrum
0Command
10 Market
France???
The Economic System Spectrum
0Command
10 Market
North Korea???
Economic Freedom Index
In Summation
• People within these central bodies are the decisions makers!!!
• No “correct” system…based on meeting societies needs in ways that they value
• PEOPLE’S RESPONSES TO DECISIONS ROOTED IN SCARCE FACTORS OF PRODUCTION.
