review three economic questions opportunity cost 3 factors...
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Economic Systems.notebook
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Review� three economic questions� opportunity cost� 3 factors of production� scarcity
� NEXT TEST:> FRIDAY, OCT 12
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FOUR MAIN ECONOMIC SYSTEMS
TRADITIONAL COMMAMND
MARKET MIXED
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Which economic system best meets the needs of the people?
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TRADITIONAL ECONOMY� produce goods based on the customs,
values, beliefs, & the needs of a people� mostly based on farming� subsistence agriculture: only enough for
local region� tend to be self-sufficient� Examples: parts of Africa, Middle East, Asia
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c
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COMMAND ECONOMY� the government controls the economy
through a planned agency� the government decides values and prices� government owns all the means of
production� falls under broader category of socialism� Ex: USSR, China, Cuba, Vietnam, North
Korea Pros
- able to shift economy quickly
- careful regulations
Cons
- limits innovation
- will lead to unrest
- no incentives
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MARKET ECONOMY� decentralized (the invisible hand- the
economy runs itself)� laissez faire: no gov't regulation� economic motivation is self-interest (desire
for profits), which causes competition� based on supply and demand
Pros
- all have equal opportunity for large profits
- leads to increase in innovation & efficiency
Cons
- because of fierce competition, businesses do not care for disadvantages or the elderly
- income inequality
- homelessness, poverty not addressed
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MIXED ECONOMY� decentralized (the invisible hand- the
economy runs itself)� prices and wages can be set by market
forces OR can be regulated buy a central government.
� the key here is the ratio between private interest and the role of the government. There are many variations of this model.
Pros
- less government interference, which means companies can be more efficient
- gov't can intervene to correct market failures
- gov't can create "safety nets" for poor and needy
Cons
-criticisms from both sides arguing that there is too much gov't involvement or too little
- state-run industries are subsidized (supported) by gov't, which leads to less efficiency
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Assignment:
Write a brief statement which answers the following question:
Which economic system is best in your opinion? Why? Compare and contrast your choice to other economic sentences (4-6+ sentences)