ROLES OF DIFFERENT ECONOMIES
1) Describe the characteristics of the traditional, command, and market economies.
2) Explain the advantages and disadvantages of the traditional, command, and market economies.
3) Describe the basic economic and social goals used to evaluate economic performance.
4) Evaluate the trade-offs among economic and social goals.
5) Explore the characteristics of a free enterprise system.
6) Describe the role of the entrepreneur, the consumer, and govt. in a free enterprise economy.
ECON – 5.1
Two 90-minute class periods (Block scheduling)
1) Set: Dollar “votes” tell producers what consumer’s want. This is a headline of a brief newspaper article on the role of the consumer in a market economy. Have students write the article.
2) Review handout from previous class on the different types of economies (handout attached).
3) Notes on Section One (attached)
4) Notes on Section Two (attached)
5) Activity – Partner up – Rank and justify the economic and social goals in order of importance to you. Then have students put their answers on the board in a chart. The rows are the seven economic and social goals, and the columns are the different groups.
6) Remain in groups and complete the sentences with each of the economic and social goals: The economic and social goal of ____ is illustrated in the economy by _____.
Example: The economic and social goal of economic freedom is illustrated in the economy by the choices people have on how to spend their money.
7) Then have students in groups of seven create a poster about one of the 7 major economic and social goals. Magazines and newspapers to illustrate. Must explain each photo.
8) Finish Section Two notes on Trade-Offs among goals.
9) Notes on Section Three (attached)
10) Library or Computer Lab activity – Have students use library resources to find visual images that illustrate each of the three economic systems. Call on volunteers to present and justify their selections in an oral report.
· Tradition plays a stabilizing role in our lives. Even the U.S. economy, characterized by freedom and competition, has some elements of tradition.
· The survival of any society depends on its ability to provide food, clothing, and shelter for its people.
· B/c of scarcity = what, how, and for whom to produce must be answered. All societies have an economy, or economic system = an organized way of providing for the wants and needs of their people.
· How these decisions are made determines the type of economic system they have.
Q. How would your life be different if you had grown up in a traditional economy?
A. You would make no economic decisions on your own – careers would have been decided for you.
Q. In what ways are traditional and command economies alike? What ways are they different?
A. In both, production decisions are already made and individual initiative is discouraged. In traditional economies, the individual’s role is defined by customs, while in command economies, a central authority defines the individual’s role.
In each market transaction, the consumer’s dollar acts like a “vote,” ensuring that producers continue to bring to the market the goods and services that consumers want to buy.
SECTION 2: SEVEN ECONOMIC AND SOCIAL GOALS
Do you place a high value on economic freedom?
1) Economic freedom = the freedom for people to make their own economic decisions, is a goal highly valued in the U.S.
2) Economic efficiency = means that resources are used wisely and that the benefits gained are greater than the cost incurred.
Resources are scarce – factors of production must be used wisely.
3) Economic equity = the social goal that explains why so many people support laws against wage and job discrimination.
Strong sense of justice – illegal to discriminate against race, sex, religion, and disability.
4) Economic security = social goal that results in programs to help support the ill, the elderly, and the jobless.
We desire protection from layoffs and illness and natural disasters.
5) Full employment = most economic systems strive for full employment, or providing as many jobs as possible.
6) Price stability, or freedom from inflation = is important to anyone trying to provide basic necessities on a limited income and for anyone planning their economic future.
Hard with a fixed income to deal with inflation.
7) Economic growth = populations tend to increase and existing populations tend to want more goods and services.
TRADE – OFFS AMONG GOALS
- When goals are at odds, people must compare costs to benefits before resolving the conflict.
- Most of the time, people, businesses, and government, are able to work out conflicts among goals.
- The flexibility of the American economic system allows choices and compromises.
Q. The idea of minimum wage supports the goal of economic equity. With which goals does the idea of a minimum wage conflict?
A. Minimum wage conflicts with the goal of economic freedom, because business owners cannot freely choose what to pay their employees. It may conflict with the goal of full employment if the minimum wage leads to a loss of jobs. It also may conflict with the goal of price stability if business owners must raise prices to cover the cost of paying a minimum wage.
*Under capitalism the basic economic decisions are made through the free interaction of individuals looking out for their own interest.
*A market economy is normally based on a system of capitalism, where private citizens, many of whom are entrepreneurs, own the factors of production.
*Free enterprise is another term used to describe the American economy.
**There are 5 important characteristics**
~Competition is allowed to flourish with a minimum of government interference.
1) With economic freedom, individuals and businesses make their own economic choices.
2) Voluntary exchange – buyers and sellers are free to decide whether or not to complete a transaction, results in both buyers and sellers believing that the good or service obtained is of more value than the money or product given up.
3) Private property – these rights motivate people to succeed. Any rewards they earn are kept. **both tangible items, such as houses and cars, and intangible items, such as skills and talents are included. Incentives to work, save, and invest.
4) The profit motive – encourages entrepreneurship and is largely responsible for the growth of a free enterprise economy. **Profit = the extent to which a person or organizations are better off at the end of a period than they were at the beginning.
5) Competition – helps lower prices. Sellers struggle to attract consumers.
THE ROLE OF THE ENTREPRENEUR
-Entrepreneurs use land, capital, and labor to make a profit.
-Entrepreneurs success = success for everyone
-Entrepreneurs search for profit leads to new products, greater competition, more production, higher quality, and lower prices for consumers.
-Many entrepreneurs fail – others manage to survive – only a few become very wealthy and famous.
Q. What would you find most attractive about owning your own business? What would be least attractive to you?
ROLE OF CONSUMER
-Consumer has much power in a free market economy. Consumer sovereignty describes the role of the consumer as ruler of the market.
-Consumers express their wants in the form of purchases in the market place.
-Economist classify consumer decisions in 3 major categories = habitual, impulsive, or rational. Give examples!
ROLE OF GOVERNMENT
-Protector, a government may pass and enforce laws meant to prevent the abuse of consumers and workers. Example: false advertising, unsafe food, unsafe automobiles, discrimination.
-Government is both a provider and consumer. The government provides education and welfare and is the second largest consuming group in the economy after consumers.
-Regulator – the government works to preserve competition – oversees interstate commerce, communications, banking, nuclear power.
-Promoter of National goals