Economic Theories

Global Economic Systems (part 2), WH/EES Standards Lab

Review:

Last time, we learned about economic systems and the 4 main types of global economic systems: Market, Command, Mixed, and Traditional.

Multiple Choice

Review Question: Which economic system would have privately owned and government owned businesses?

• market economy

• command economy

• mixed economy

Multiple Choice

Review Question: _________ is an economic system in which factors of production are publicly owned and the government dictates what is produced and how much.

• A Market economy

• A Command economy

• A Mixed economy

Today's Learning Goal:

After today's lesson, scholars will be able to explain how each economic system interacts with factors such as supply and demand, wealth and poverty, and control and power.

Examples of Economic Systems

You may have heard of the term "capitalism." Capitalism is the economic theory that has most heavily influenced our economic structure in the United States. Capitalism is an example of a Market economy.

In a similar way, Communism is an example of a Command economy, and Socialism is an example of a mixed economy. There are other societies that are more heavily influenced by these economic theories. For example, Egypt, Cuba and China have more Communist economic systems, and Canada, Sweden, and Hong Kong have more Socialist economic systems.

Multiple Choice

With a market economy like __________, there's incentive to outperform the competition.

• Communism

• Socialism

• Capitalism

Multiple Choice

Will argued that ________ could be good. He said if the government owned factories, farms and other means of production, the economy would be regulated and people would have steady jobs.

• Communism

• Socialism

• Capitalism

Multiple Choice

__________ is an economic system in which the government owns and controls the main industries, but private property is allowed.

• Communism

• Socialism

• Capitalism

Supply and Demand

In a market economy, market forces called supply and demand determine price and rate of production. Supply is the amount of available goods and services. Demand is the desire of customers to purchase a given good or service.

If demand is low and supply is high, prices decrease. If supply is low and demand is high, prices rise. When demand surpasses supply, it is in the best interest of a business to increase production to meet the demand for their product. Conversely, as demand decreases, businesses will likely decrease their rate of production.

Multiple Choice

Which word means the amount of something, especially goods or services, available to be used.

• supply

• demand

• factors of production

Multiple Choice

Fill in the blank: Their _______ of food was enough to last them through the winter.

• supply

• demmand

• factors of production

Multiple Choice

Review Question: When the government does not control _______, private individuals or businesses are responsible for funding the means by which they produce goods and services.

• supply

• demand

• factors of production

Multiple Choice

Fill in the blank: There is growing ______ for ice cream in the summer as it gets hotter.

• supply

• demand

• factors of production

Multiple Choice

Nikola’s t-shirt business produced 100 shirts. In less than one day, all 100 shirts sold out. Fifty additional orders were placed, but could not be fulfilled since he had run out of shirts. Which of the following is true?

• There was more supply than demand.

• There was more demand than supply.

• Supply and demand were about equal.

• The rate of production exceeded demand.

Multiple Choice

If supply is low and demand is high, ____________.

• prices rise

• prices drop

• prices remain flat

• competition disappears

Wealth & Poverty in a Market Economy

A key principle of a Market economy such as Capitalism is personal freedom. In theory, individuals are free to work as hard as they please to earn as much money as they can. Once earned, that money is theirs to save, invest or spend. In this system, there is incentive and opportunity to accrue wealth. At the same time, financial security is not guaranteed. Unwise spending or a lack of government safeguards may set a person on the path to poverty. Meanwhile, an inheritance or successful business venture may set another person on the path to affluence. With extreme highs and lows, inequality is as much a trait of a Market economy as personal freedom is.

Multiple Choice

Which of these statements would an opponent of command economies most likely agree with?

• With no incentive to earn more money, people won’t work hard

• Stability should come first and foremost in any economic system.

• We must ensure that all citizens receive equal outcomes at all costs

• Unwise spending should not be a possibility in an economic system.

Multiple Choice

"Competition breeds innovation," said the CEO. "Doing business in a _____________ provides plenty of opportunities to try new things."

• Traditional economy

• Command economy

• Market economy

Power & Control in a Command Economy

A Command economy is also known as a planned economy. Since the government has complete control over economic activity, activity can be planned to achieve specific goals. In theory, these goals should include fairness and stability. With carefully planned distribution of wealth and an absence of supply and demand, a Command economy should be highly predictable. Individuals should have equal outcomes and a level of financial stability that matches the overall stability of the economic system. In reality, centralized economic control places power in the hands of a small group of people. In communist Russia and China in the 20th century, this resulted in inequality and instability. Today, we see the same issues in North Korea, one of the only active Command economies in the world.

Multiple Choice

Based on the previous passage, which of the following best describes the relationship between a Command economy in theory and Command economies in practice throughout history?

• In theory, a command economy is not subject to market forces. In practice, command economies have been affected by supply and demand.

• In theory, a command economy promotes instability. In practice, command economies have been insulated from instability.

• In theory, a command economy promotes fairness. In practice, command economies have resulted in unchecked power.

• In theory and in practice, command economies achieve equal outcomes.

Today's Learning Goal:

After today's lesson, scholars will be able to explain how each economic system interacts with factors such as supply and demand, wealth and poverty, and control and power.

Poll

Which of the following best describes how you feel about today's learning goal?

• I'm still confused about what we learned today

• I understand some of what we learned today

• I understand all of what we learned today

• I'm an expert on what we learned today & I could teach the next lesson on this

Open Ended

In your own words, explain what 9th grade scholars need to know about supply and demand, wealth, and power in the 4 economic systems.