economic systems

• how a nation is organized for production

  • how they use factors of production

  *these are models in reality no economic system complete fits any of these

  • traditional, command, market, mixed

traditional

• you prioritize labor and land and not capital and entrepreneurship

  • people’s economic roles are the same as those of their parents and grandparents

    • tradition and customs decide what is produced (ex. amish)

      *do not care about capital and technology and more on efficiency

command

• when the government has total control (controls the factors of production) of the country

  • they makes all the decisions on how to use resources

    • what goods and services will be produced

      (commonly seen and worked in dictator-led countries —> north korea)

    *cannot freely open or start a business

    • you’re working because of your talent and the government need your resources and not money

      [goals: equity (everyone paid the same), stability, efficiency (government utilizing factors of production)]

market

• no government intervention (laissez-faire)

  • price for goods and services will be influenced by consumers

    *no country today has a complete market system - no efficiency

    ex. america in the progressive era —> america, india, and japan are very close to this today

    [goals: freedom, growth (byproduct of freedom), efficiency (individuals being self-reliant)]

mixed

• SOME government intervention

  *varies on nation

  • decisions by consumers, businesses and government help determine economic activity

    • includes social security, welfare, safety inspectors, healthcare

    *most of today’s economies are mixed

    ex. america, india, japan, germany, china, russia

    [goals: freedom (entrepreneurship), security (government regulation), growth]

economic social goals

• every country has 6 goals

  • efficiency, equity, freedom, growth, security, stability

    *how they rank the goals determines which economic system they have

    • every nation cannot prioritize all goals at once

efficiency

• keeping track of all of a nation’s resources to make sure everything is being used to benefit the nation

  • making use of all factors of production and resources

    ex. tax breaks for renewable sources, everyone will get two toves of bread every week

equity

• command:

  • everyone has a job and is paid the same

    • equal distribution of wealth

      ex. doctor, teacher, garbage man, waiter —> all paid the same

• mixed-market: (usa)

  • everyone has equal economic opportunity to get rich

    • kid from india gets more financial aid from the government

freedom

• people decide how they want to spend their money, choose their career, and create their own business, buy/sell property

  *NOT 1ST AMENDMENT RIGHTS

growth

• countries want to grow and make more money each year —> more production

  ex. watch the stock market and unemployment rate

security

• protecting people from poverty due to unemployment, homelessness, and hunger

  • government could provide jobs, housing, healthcare

    • usa government gives unemployment benefits, welfare food stamps, minimum wage

stability

• economy does not change day to day

  • if it does, government steps in and takes control

    ex. government controls all prices to make there are no ups and downs in society