Economic Systems (3)

Question 1

We must answer 3 questions to have an economic system:

Answer 1

1. What to produce?
2. How to produce it?
3. Who gets it?

Question 2

Planned (Command) Economies

Answer 2

When the government totally owns and controls the factors of production for the common good

Question 3

Market (Capitalist) Economies

Answer 3

When individuals own the factors of production for profit and the government stays out of it

Question 4

In true communism, who owns the factors of production, and who gets what’s produced?

Answer 4

Everyone, equally.

Question 5

Communism

Answer 5

• Everyone equally owns the factors of production

- Everyone equally owns what gets produced

Question 6

Socialism

Answer 6

• Some private ownership AND
• Some public ownership & control of industry
• Free and equal access to certain essential things

Question 7

The Invisible Hand

Answer 7

The idea that individuals and businesses meet society’s needs when they seek their own self-interest

Question 8

Why any government involvement at all?

Answer 8

• Because the market doesn’t enforce law, protect us from invasion, or look out for things consumers might have a blind spot for, like the environment or the poor.

Question 9

Mixed Economies

Answer 9

• Have some government and some private control
• But how much of each depends on the country’s values
• Compare Denmark and China!

Question 10

What is the best economic solution to the world’s problems?

Answer 10

• It depends. There’s always an opportunity cost!

- It’s up to you and your government to decide if it’s worth it!