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Chapter 3

Economic Systems: Who or what decides what you get?

Chapter 3 Learning Objectives: Have you met them?


If you have come to class, completed the reading and participated in all related class activities, you can
identify the factors and economic goals that influence decisions about the production and consumption of goods. compare and contrast the role of government in command and market economies. compare the advantages and disadvantages for consumers and producers in command and market economies. identify and explain the features of the American free enterprise system.

Who gets what?

How do societies decide?

Answer 3 Basic Economic Questions


Every society must answer them! No matter how rich or poor about the goods & services its people want

What will be produced?


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Even with limited resources, billions of things might be produced. Who or what decides which wants to fulfill and which to leave unsatisfied?

How will it be produced?


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Many ways to make a desired item Who decides how the factors of productions will be organized to make what people want?

For whom will it be produced?


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Once produced Who should get it?


First in line? The highest bidder? Person who needs it most?

Different societies have different economic goals.


Freedom Efficiency Equity Growth Security Stability Societies differ in what is valued Progress toward one goal may be at expense of another

Who decides what.

in different economic systems?

How do mixed economies

divide the decision making?

Mixed Economies
Nearly all countries are mixed economies
Both the government and individuals play important role in production & consumption

Governments role varies, but includes


Protection

(establishing institutions that allow markets to operate) (stepping in when markets run unacceptably) (providing goods & services that markets do not always provide, or do not provide enough of)

Regulation

Public Benefits

Index of Economic Freedom, 2008

Mapping Economic Freedom

What are the key characteristics of the U.S. free enterprise system?
There are seven . .

Economic Freedom
We are free to
Work where we want Buy what we want Sell what we want

Competition
Firms are free to vie for our business We, the customers, benefit

Equal Opportunity
We all have (in theory) the same equal rights: To seek an education To compete in the marketplace

Property Rights
We have the right to buy, sell and control the use of our property, including intellectual property.

Binding Contracts
We have the right to enter into contracts to buy and sell goods & services. Such contracts are binding. Courts will enforce them.

Profit Motive
Drives the free enterprise system. Provides the incentive To work To start new businesses

Limited Government
Laws and government agencies regulate, but do not run U.S. businesses.