United States Economy

UNITED STATES ECONOMY

Needs and Wants
When was the last time you went to a store and bought something? Did you really need what you bought? Or did you buy something simply because you wanted to have it? People buy all kinds of things every day, but every purchase they make can be placed in one of two categories: items they need and items they want.

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What Is an Economy?

A need is something we require to survive. Food, shelter, and clothing have always been considered the most pressing needs. Over time, education has come to be considered a need because it improves a person’s quality of life. Healthcare is also a need. It also improves a person’s quality of life and can provide lifesaving treatment.

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What Is an Economy?

Most other items are wants. Wants are items that people enjoy having but are not essential to their survival. While basic survival needs are the same for everyone, wants vary among people, cultures, and locations. Together, needs and wants determine the items and services that drive an economy.​ There are three basic types of economic systems: traditional economies, command economies, and market economies.
Vocabulary economy - the way a country manages its money and resources to produce, buy, and sell goods and services

What Is an Economy?

Multiple Choice

A ____ is something that is essential for human survival and is required to maintain health and security.

• need
• want

• fancy

• wish

Multiple Choice

In economic terms, what are things that a person would like to have but are not needed for survival.

• Wants

• Essentials
• Survival items
• Necessities

Dropdown

An ​

Select answer

is a system that describes how people and businesses make and spend money, and how they divide up goods and services.

​Imagine you’re in a store, and you have a list of things you need to buy. As you walk around the store, you make decisions about what you’re going to purchase, and you gather your goods. Afterward, you pay for your goods. But how do you pay for them? Do you give the cashier cash? Do you use a bank card? Are the goods purchased digitally through an app on a cell phone? Today, people have several ways to pay for the things they buy.

​Economic Systems

One way to get goods or services is to barter, or trade. Bartering was a primary means of exchange in earlier history. For example, in the ancient world, people bartered natural resources (materials found in nature that are used by people for various purposes, such as water, minerals, forests, and fossil fuels.) for other natural resources, handmade goods, and even food.

​Traditional Economy

Imagine you live in a small village where everyone works together to get what they need. Instead of going to a store to buy things, people in a traditional economy make or grow what they need themselves. For example, if you need food, you might grow vegetables or raise animals.

Exchange: Instead of buying and selling, people in a traditional economy often trade goods and services directly. For instance, you might trade some of your vegetables for a pair of shoes someone else made.

In a traditional economy, the way things are made and exchanged is based on customs and traditions that have been passed down through generations. This means people often do things the same way their ancestors did. It’s a lot about keeping old ways alive and working together as a community.

​Traditional Economy

​The Kavango people of Namibia use fishing techniques passed down from generation to generation.

Virtual Tour of traditional hut in Africa

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Multiple Choice

What are the characteristics of a traditional economic system?

• Characteristics include barter system and built upon traditions, customs, and beliefs

• Heavy reliance on industrial manufacturing
• Government control of resources

• Use of advanced technology

Multiple Choice

What are natural resources?

• Things found in nature used to make a product.

• Natural resources are people who make and sell your products.

• Natural resources are found only in cities.

• Natural resources are only man-made products.

Imagine a big school where the principal decides everything that happens. If the principal says, "Everyone must wear blue Adidas shirts on Fridays," then everyone has to wear blue Adidas shirts on Fridays. The principal makes all the decisions about what classes you have (you cannot choose your electives), what backpack you use, and even what you can and cannot eat for lunch.

In a command economy, it's kind of like that school where the government, makes all the important decisions about how things should be produced, what should be produced, and who gets what.

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​Command Economy

In this type of economic system, a command economy, the government decides what goods and services will be produced, what price those goods and services will cost, and how they will be distributed.
In a command economy, the wants of individual consumers (buyers) are rarely considered. The government also usually owns the means of production (the tools and resources needed to make goods and services example: land, transportation, technology)—all the resources and factories. North Korea and Cuba are current examples of command economies.

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​Command Economy

Here’s how it works:

Central Planning: Instead of letting businesses and people decide what to make and sell, a central authority (like the government) plans and decides everything. They decide what goods and services will be produced.

Production: The government tells factories and farms what to produce and in what quantity. For example, they might say, “We need 1,000 bicycles this year,” and then they make sure that factories produce that number of bicycles.

Distribution: The government also decides how goods and services are distributed. They might decide who gets what and how much of it. For instance, they might decide that everyone should get a certain amount of food or clothing.

Prices: In a command economy, prices are usually set by the government rather than by supply and demand. This means that prices don’t change based on how much of something is available or how much people want it.

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​Command Economy

So, in summary, in a command economy, the government has a lot of control over what gets produced, how it’s produced, and who gets it. This is different from other types of economies, where people and businesses have more freedom to make their own decisions.

​Command Economy

Multiple Choice

Command economies are dominated by:

• 
  Traditions, customs, and beliefs

• The citizens of the country

• The government
• Local communities

Multiple Choice

Who or what determines what, how and for whom goods & services are produced in a Command Economy.

• Private businesses determine production decisions.

• Consumers decide what goods are produced.

• Private companies determines.

• The government determines what, how, and for whom goods & services are produced.

Hotspot

Which country is an example of a current-day command economy?

The United States has one of the largest and strongest economies in the world. The term free enterprise describes the American economic system. Free enterprise is a type of market economy. The third type of economic system, a market economy or free enterprise economy, is based on individual choice, not government demands.

In this system, the government does not set the prices. It is one based on supply and demand. Supply and demand help decide how much of something is available and how much people are willing to pay for it.

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Market Economy

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In a market economy, the government has limited control, so consumers are free to buy whatever product they want. Companies can make whatever product they want. People are free to own property and in fact individuals own most businesses.​

Market Economy

Imagine you’re at a big fair with lots of different booths. Each booth is run by different people who are selling things like lemonade, snacks, or handmade crafts. Now, think of this fair as the United States economy, and the booths as different businesses.

​This is how it works:
Freedom to Start a Business: Just like anyone at the fair can set up a booth if they have something to sell, in a free enterprise economy, anyone can start their own business if they have a good idea.

Competition: At the fair, there might be several lemonade stands. Each stand tries to be the best, maybe by offering the coolest flavors or the lowest prices. This is like competition in the economy—businesses compete to offer better products or services.

Supply and Demand: The prices of things are influenced by supply (how much of something there is) and demand (how much people want it). If lots of people want chocolate chip cookies but there aren’t many available, the price might go up. If there are plenty of cookies and not many people want them, the price might go down.

​United States - Free Enterprise

Choice: You get to choose which lemonade stand you want to buy from, and businesses want to attract you by offering things you like. In a free enterprise economy, consumers (people who buy things) have many choices, and businesses try to make their products or services as appealing as possible.
Profit: When a lemonade stand sells a lot of lemonade, they make money (profit). In a free enterprise economy, businesses aim to make a profit, which encourages them to work hard and come up with great ideas.
Limited Government Involvement: The fair organizers don’t tell each booth exactly what they have to sell or how to run their booth. Similarly, in a free enterprise economy, the government doesn’t control businesses but makes sure the rules are fair and helps out when needed.

​United States - Free Enterprise

So, in a market economy or free enterprise economy, it’s like everyone is running their own little businesses and making choices based on what people want and what they’re willing to pay. This system allows for lots of variety and innovation because businesses are always trying to offer something new or better to attract customers.

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Multiple Choice

The government has set the price of milk for $4.68 based off of quotas. What type of economic system is this describing?

• Traditional economy
• Market economy
• Command economy

Multiple Choice

North Korea has a dictator who controls all economic decisions. The individuals have no say. What type of economic system is this describing?

• Market economy
• Command economy
• Traditional economy

Multiple Choice

The Aborigines of Australia have a strong system of tradition. They work together to farm, hunt and gather. They barter for things they need. What type of economic system is this describing?

• Market economy
• Traditional economy
• Command economy

Multiple Choice

When someone buys a product they are called a...

• producer

• seller
• consumer

• distributor

Multiple Choice

Which economic system is practiced in the United States?

• traditional

• command

• free enterprise

• there is no economic system in place in the U.S.

Multiple Select

Which of the following does the free enterprise system allow? (SELECT THREE CORRECT ANSWERS)

• Choice

• Profit

• Competition

• Government controls the economy

Multiple Choice

The extra money that a producer makes above and beyond what it

costs to make the goods he or she sells is called-

• cost
• loss
• tax

• profit

Multiple Choice

When two or more businesses produce and sell similar products and compete against each other

• Collaboration
• Monopoly
• Franchise
• Competition

Multiple Choice

The demand for wheat has increased recently. Farmers have decided to charge more for wheat. The government is not involved at all. What type of economic system is this describing?

• Command economy
• Free market economy
• Traditional economy

Categorize

Options (11)

Government decides what will be produced

Individuals have NO influence on economic decisions

Government owns means of production

decisions based on customs and beliefs

Barter

passed down through generations

Individuals (consumers) control the economy

Prices are determined by supply and demand

Private Property is protected

Limited Government

North Korea

Correctly match the description with the economic system.

Traditional Economy

Command Economy

Market Economy