Lesson 1.3: Modern Economic Systems

Modern
Economic Systems

​Central authority (government or small group of people) decides what, how, and for whom stuff is made.

EX: Communism

Command

Individual people (and companies) decide what, how, and for whom stuff is made.

EX: Capitalism

Market

Multiple Choice

The government of Sylmarland has recently implemented a new economic policy to address climate change. They have mandated the shutdown of industries that are environmentally harmful and redirected resources towards the development of renewable energy technologies. 

Do you think Sylmarland is exhibiting characteristics of a command or market economy?

• command

• market

Capitalism

• ​​As a market economy where private individuals or corporations own and control the means of production.

• Contemporary examples: the United States and Western European countries.

• Advantages: can encourage entrepreneurship and innovation, can provide consumers with wide range of choices in goods, may lead to more efficient allocation of resources based on supply and demand

• Disadvantages: can lead to income inequality, may lead to negative externalities like climate change, may lead to instability like recessions

​Communism

• ​​As a command economy where the state owns and controls the means of production.

• Historical examples: Soviet Union and China during the Cultural Revolution.

• Advantages: can allow for efficient resource allocation, can reduce inequality and provide basic needs for all, and may lead to long term stability

• Disadvantages: may stifle innovation and creativity, may limit consumer’s individual choice, government involvement can lead to bureaucratic inefficiencies

Multiple Choice

Sylmarland is facing economic challenges. In response, the government decides to reduce regulations on businesses and reduce taxes on businesses in hopes of incentivizing innovation and individual entrepreneurship.

Do you think Sylmarland is more closely aligned with a Communist or Capitalist economy?

• Communism

• Capitalism

Assignment Due End of Class:

Read and complete the following handout.

You CAN work alone or with a partner of your choice, but no more than 2 people can be working together.

We will have an informal whole class debate on whether which is the better economic system tomorrow. Make sure you grasp the content.