Chapter 2 Review

January 6, 2018 | Author: Anonymous | Category: Business, Economics, Macroeconomics
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Chapter 2 Review Economic systems

Economic systems

• Traditional

• Advantages* people know what to make based on tradition *for whom is decided by tradition • Disadvantages* new ideas discouraged * strict social rules

Economic Systems

• Command (controlled by the government)

• Advantages: * can change direction quickly * people don’t worry about where they will work/study

• Disadvantages: * doesn’t meet the demand of the consumer * no incentive to work * slow decision making/long paperwork process * entrepreneurs not in need

Economic Decisions

• Market

• Advantages: * over time can adjust to change

* high level of individual freedom * small level of gov. interference * everyone has a say in the economy

• Disadvantages: * basic needs for everyone are not provided * gov. needs to provided highly needed services like healthcare & education * the unknown workers and businesses face

Rich in Russia 1. What advantages and disadvantages did Russians experience with a command economy? With a market economy? 2. What characteristics of a market economy have contributed to the divide between rich and poor in Russia?

Capitalism • Free enterprise economy * competition * profit motive * private property rights * economic freedom

Role of the Government • Protector • Provides certain public services • Preserves competition in the marketplace (regulator)

The Entrepreneur in a Capitalist economy • Organizes and manages land, capital and labor in order to gain a profit • Start up new businesses • “want to be own boss” willing to take an economic risk to make dreams a reality

Entrepreneurs & the economy • People benefit from new and better products • Government benefits by having higher levels of economic activity and larger taxes

The Consumer • Determine which goods are bought and produced • Express their wants in the form of purchases • Dollars = votes

Netflix Video 1. In what ways is the owner of Netflix's seen as an entrepreneur? 2. In what ways is the company meeting the wants of the consumer? 3. How is the company planning for the future.

Economic Systems Posters • • • •

Traditional Command Market Explain how each system decides the For Whom, What and How questions every economy must answer.

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