Consumer Economics- Unit 1

Traditional Economy

Economy based on customs and traditions (barter/trade)

Command Economy

One central authority makes the decisions

Market Economy

Individuals make decisions

Mixed Economy

A combination of elements from market and command economies

Characteristics of a mixed economy

• Limited government involvement

• Businesses are free to compete

Characteristics of a command economy

• Public vs Private goods

• Monetary assistance

• Regulation (FDA, EPA)

• Collects taxes to benefit society

Characteristics of a market economy

• Private property

• Freedom of choice (consumer)

• Freedom of enterprise (business)

• Driven by profit incentive, competition, and supply/demand

Government Roles

Collect taxes (revenue)

Purpose of taxation

• Fund public goods and services

• Redistribute income

• Influence behavior

• Stabilize the economy

1- Funding public goods and services

Available for everyone to use and protect citizens

• Education

• Military

• Police

• Highway

• Government regulation/agencies

2- Redistribute income

To help provide income and services to those in need

• Social Security

• Medicare

• Medicaid

• Welfare

  • Unemployment

3- Influence Behavior

To help discourage purchasing bad products

• Excise tax (alcohol)

• Soda tax

• Gas tax

  • Cigarette tax

4- Stabilize the Economy

Using taxing and spending to help if the economy is growing too fast or too slowly

• Fiscal Policy

Personal Income Tax

The tax a person pays on their income which includes earned and unearned income (interest on a bank account)

Corporate Income Tax

A tax businesses must pay on income

Excise Tax

Taxes used on specific goods like alcohol and tobacco

Sales Tax

Taxes applied to goods/services (retail)

Property Tax

Tax on the value of real estate property