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Economics Systems August 12-18 2014
Economics Systems August 12-18 2014
ECONOMIC
SYSTEMS
Terms to Know
Capitalism
Free Market
Command
Traditional
Mixed
Capital Resources
Land
Human Resources
Natural Resources
Entrepreneur
Trade Barriers
Tariffs
Quotas
Embargo
Currency Exchange
Specialization
Three Problems
Every society has three
problems:
1.How do we decide who
gets what resources ?
2. Who uses which
resources
3. What happens to
those people who cant
get what they want,
given limited resources?
Three Economic
Questions
Market Economy
An economic system in
which individuals own
and operate the factors
of production. There
are really NO complete
market economies
AKA: Free
enterprise,
Capitalism
The closest is Hong
Kong
Market Economies
Resources are owned and
controlled by individuals.
Economic decisions are made by
individuals competing to earn
profits.
Individual freedom is considered
very important.
Economic decisions are made by
the basic principals of supply and
demand.
Profit is the motive for increasing
work rather than quotas.
Market Economies
Also called capitalist
economies, there are
many economic
freedoms.
There is competition
among businesses
Competition determines
price which increase the
quality of the product.
Command
Economy
An economic
Command Economies
The government or other
central authority makes
decisions and determines
how resources will be used .
Change can occur relatively
easily.
There is little individual
freedom.
There is no competition.
Businesses are not run to
create a profit.
Command Economies
Consumers have few
choices in the market place
Factories are concerned
with quotas-making
enough for everyone if
possible.
Shortages are common
because of poorly run
factories and farms.
The government dictates
the job in which you work
Command Economies
The government sets
the prices of goods and
services
Examples of command
economies: Cuba,
North Korea and
Vietnam
Traditional
economy
Traditional economy
Farming, hunting and
gathering are done
the same way as the
generation before.
Economic activities
are usually centered
toward the family or
ethnic unit
Men and Women are
given different
economic roles and
tasks.
Mixed
economy
Economy where the
government and
people both are
involved in the running
of the economy=has
features of market
and command.
Mixed Economies
Government and
individuals share the
decision making
process.
Government guides and
regulates production of
goods and services
offered
Individuals own means
t
Gov
&
of production.
pl e
o
her
e
t
P
e
g
to
k
r
o
Protects consumers andw
workers from unfair
policies.
Factors
of
Producti
on
Human Resources
(Human Capital)
Capital ($$$)
Natural Resources
Entrepreneur
Building a Workforce
How a country manages is
productive resources makes a
big difference in the strength of
its economy.
Investing in HUMAN CAPITAL
will pay off for years to come. As
humans increase their knowledge
they are capable of completing
more complex tasks which are
more valuable to businesses.
They can also make more $$$.
Capital
Resourc
es
Resources made and
used to produce and
distribute goods and
services: examples
include tools,
machinery and
buildings.
Natural resources
Gifts of nature that
can be used to
produce goods and
services.
AKA: Land.
There are 2 types of
natural resources:
Renewable and Nonrenewable.
Natural resources include
soil, timber, oil, minerals,
and other goods taken
more or less from the
Entrepreneur
One who draws upon
their skills and initiative
to launch a new
business venture with
the aim of earning a
profit. Often a risktaker, see opportunity
when others do not.
Entrepreneur
Why start your own
business?
Profit is a company's
earnings after all
expense are paid.
Profit provides incentive
for entrepreneurs.
Making money, pride in
your idea and product.
Trade Barriers
A trade barrier is a general
term that describes any
government policy or
regulation that restricts
international trade.
These barriers make sure that
local businesses are not
destroyed by foreign products.
The barriers can take many
forms, including:
Quotas
Tariffs
Embargo
Tariffs
1.
2.
A tariff is a tax on
goods when they
cross a national
border.
A tariff makes sure
that prices of foreign
and local made
products are
competitive so that
both sellers can
compete.
Quotas
An import quota is a
trade barrier that limits
how many of a good
can be imported into a
nation at a given time.
Quotas protect local
farmers and
businesses and keeps
competition alive.
Embargo
An embargo is the prohibition
of trade with a certain
country, in order to isolate it
and to put its government into
a difficult internal situation,
given that the effects of the
embargo are often able to
make its economy suffer from
the initiative.
The embargo is usually used
as a political punishment for
some previous disagreed
policies or acts.
Currency Exchange
Forms of Currency
Shells
Precious Metals
Silver
Gold
Bills or Notes
Paper $ (Dollars, Peso, Euro, and so on)
Plastic
Debit and Credit Cards
The Future??????
Currency Exchange
Currency Exchange
Exchange rates are an important
consideration when making
international investment decisions. The
money invested overseas incurs an
exchange rate risk. Exchange rates have
an affect on the economics of the nation.
Affects the prices of imported
goods.
Affects the overall level of price and
wage inflation.
Influences tourism patterns-people go
where their $ is worth more
Will influence consumers buying
decisions and investors long-term
commitments.
Personal Money
Management
Personal Money
Management
Putting money in a
bank or credit union
can make you EARN
interest.
Saving money allows
you to increase your
money by INVESTING.
Bibliography
Federal Reserve of New York.
http://www.ny.frb.org/education/fx/foreign.html
Retrieved March 13, 2009
Trading Around the World, Indiana Department of Ed. 2009.