Comprehensive Guide to Economic Systems and Resources

Economic Systems

Essential questions:

What to produce

How to produce

For whom to produce

Productive resources (factors of production)

resources (such as land, labour and capital) that are used to produce goods and services

Land

a factor of production that includes all natural resources used to produce goods

Includes mineral deposits, ground water, fuel

Raw Materials:

All natural resources used in production

Capital + types

refers to the factories, warehouses, machinery and equipment used in the production of o goods and services as well as they money available in an enterprise to acquire these

Real Capital: refers to machinery, warehouses and equipment, by expanding this grow its total production and improve its productivity in the future

Money Capital: refers to the funds used to acquire these

Labour:

Includes both the physical and mental effort people contribute to the production process

Paid and unpaid

Productivity:

A firm's ability to maximize output from the resources available (measured as the firm's output per worker)

Entrepreneurship:

the contribution made by an owner, manager or innovator who organizes land, labor and capital to produce goods and services (develop and organize business activities, takes risks!)

Productive resources are either:

Tangible resources: have physical properties that can be seen, touched and are easily quantified

Intangible resources: lack the physical properties that make them easy to quantify, necessary for production such as entrepreneurship, knowledge and an environment for enterprise

Environment for enterprise:

third, intangible factor that is a society's social values and institutions such as stable government that are favorable to businesses attempting to produce and sell goods and services

Favorable climate to increase economic activity

The sum total of its tangible and intangible productive resources is

a clear indicator or economic wealth

Economic system

the laws, institutions and common practices that help a country determine how to use its resources to satisfy as many f ot people needs and wants as possible

How to determine how to make the best use of society's limited resources?

What to produce

How to produce

For whom to produce

The way these questions are answered determines the type of economic state that operates in a society

Categorized into traditional, command and market economy

Traditional:

Economic system where production decisions are determined by the practices of the past

command economy

Economic system in which production decisions are made by government-appointed central planners

Who, What and Why: command

Answers all production questions based on the best interest of the state

How: The states own the productive resources and central authority allocates them

Who: People are obligated to serve the states and in turn, state authority meet the individual needs such as good, housing, medicine and education

Uses a system of reward and punishment to promote increased productivity (contribute more= better privileges, don't contribute are penalized)

What: State decides, prioritizes production of capital goods over consumer goods because capital goods increase the economy's ability to produce more in the future so short supply of consumer goods (Cuba, north korea)

Market economy:

economic system in which production decisions are made by the actions of buyers and sellers in the marketplace

Individuals determine answers to the basic production questions based on self-interest and act on themselves (free enterprise)

Elements of market economy:

Private property

Freedom of enterprise

Profit maximization

Competition

Government's role is only to provide law and order to assist economic development

Eg. Hong Kong, USA

Mixed Economies:

Economic system that contains elements of market, command and traditional systems

Very "pure" economic systems exist today as not one by itself has managed to meet all the needs and wants of its member

Political leaders have integrated the best elements of each economy to create their own

Canada:

Mixed market economy, has both private and state-owned enterprises

Includes crown land (government-owned land)

Includes private land ownership

Reserves for indigenous that have traditional economies

Businesses allowed free enterprise but must follow government regulations

Government established "social safety net" for its needy citizens like income supplements, medical care and employment insurance for workers which will not be part of market economy

China:

Went from strong command economy to "Socialist market economy"

Elements of free market has been introduced but under the Communist party who is still in charge

Now fastest growing major economies with the largest manufacturing economy and exporter of goods

Large population and workforce, wages kept low so produce inexpensive products that compete favorably in world markets

Goal of developing infrastructure further and address inequality across the country by operating out of a series of ambitious five-year development plans

Often sacrifice environmental protection, safety standards and human rights to achieve an 8% growth rate annually

Sweden

Nordic economy model is similar in Denmark, Finland, Iceland, etc

Common trait is an attempt to valence free enterprise with social responsibility

Done through a state where citizens contribute effectively to economic growth and in return they are looked after

Economic opportunity through framework of free enterprise, open markers, private ownership and free trade

Included unized workforce where labour, employers and government negotiate wages, working conditions and market policies

The government negotiates conflict between labour and capital to reduce conflict and ensure business practices support sustainable economic growth and shared prosperity

LAbour and capital are seen as economic partners

All citizens are entitled to health care, pensions, support for the unemployed, disability benefits and child care

focused on the efficient production of quality products for export around the world

Primary exports include automobiles, industrial machinery , chemicals, paper, pu;[ and world due to their rich natural resources and skilled labor force

Strong technology growth

Who, what, why: traditional

What: Goods and services produced today are the same as those produced in the past and in same method

How: They use traditional methods passed down through generations often labor-intensive and using simple tools rather than modern technology.Total output does not vary vastly year to year

Who: Each family's economic strategy is to be as self-sufficient as possible, what a family needs will be what they produce (surplus goods are traded for other essential items)

Bartering

the trading of goods and services without monetary value

where is traditonal markets found/include

Lots of passing down traditionals meaning children assume to take their parents roles so people spend their lives in social class they are born in

Difficult to find today with technological advancements transforming most of them (eg. Haiti and ethiopia)

Fond in a static subsistence society where people do little long term planning, focusing on ensuring the challenge of each day

Who, what, why: market

What: determined by consumer demand, businesses produce what people are willing to buy.

How: Strong goal for profit, determines the how to be produced because consumers prefer low prices and to maximize profit, those inefficient in production go out of business

Who: determined by the income people receive for their contributions (mostly labour) to the production process

Income level determines for whom the consumer goods are produced for as those with high income can afford to buy more of the national output

Private enterprise

term applied to the private ownership of productive resources

Market Value

The price the product can fetch at the market at each stage

Value added

The increase in market value of a product resulting from additional processing or refinement of that product