Unit 3: Economic System

Video 3:

We are going to talk about types of economics systems.

There are four different types of economic systems and three basic economic questions, that each one answers. And the reason, they're different because they answers two questions differently: they look at what to produce, how to produce it and for whom to produce it. Those are three basic economic questions and you need to be absolutely certain that you know what those questions are.

·         The first type of economic system is a traditional system, this is an economy based on custom. There are not very many of these. In the past, this has been probably the most popular.

Ekismo culture or the Australian Aborigines are in some of these real isolated places that live on subsistence agriculture but they just grow enough for themselves. When they look at to produce it is needs for survival. They produce basically through hunting and gathering. And then, for whom to produce it, they make everything for themselves, so there's very little. This is very difficult to find in the modern world

·         The second one is a command economy. In this command economy, the government is the entity that answers the questions of production. In deciding what to produce, the government makes that decision. In deciding what to produce, it the government plans at what factories. They are going to have what jobs people are going to have. The government controls everything. The government decides how to use their resources. This has been the type of economy system that is more common in socialist governments. This is the form of government of a form of economic system that was in the former Soviet government. Basically, the Soviet government said we're going  to make bread on Wednesday. People are going to buy bread on Wednesday and that's all that's going to be available.

·         The third king is a market economy. This one is also a pure market economy where people are consumers. They are the only ones who answers to questions of production. So, when you're looking at what to produce, it is completely and totally up to consumers. When you look at how to produce it, businesses are the ones who choose what they're going to produce and then, if consumers don't buy, the businesses go out of business. And for who to produce these goods, it's based on consumer income. If they can afford it, they can buy it. With a pure market economy, individuals are the ones that are in control. Economy individuals are the ones that are in control. There is no government regulations which means that absolutely nothing would be illegal. If there is a market for it, people can buy it. There is no government regulation, over anything that is produced. There is no government regulation over business, so there are no protections for consumers what so ever in a pure market economy.

·         The Fourth Kind is a mixed economy. This is what most countries around the world are in a mixed economy consumers and business make those decisions about the economic questions. But there is some government control, businesses and consumers decide what to produce, but the sets up regulations to protect consumers from bad products, from products that are unsafe, from businesses taking advantage of them that kind of when you look at how to produce it. The government set safety standards. Thing like child labor they have to be certain work standards and factories or things like that. The government will stop it and fine the companies or shut them down. When you look at who the goods are produced. It's based on consumers income, but there's also some government assistance for people who can't afford certain services. There is in a mixed economy some government regulation but it is mostly for the protection of consumers.

Questions:

1. Which are the three basic economic questions?

- What to produce?

- How to produce?

- Whom to produce?

2. Which are the economic system?

Traditional system, command economy, economy market pure and mixed economy

3. The traditional system is based on...?

This is an economy based on custom

4. The traditional system make enough for..?

They just make enough for themselves and for their family

5. Who respond the answers of production in the command system?

The government is who responds the questions of what produce, for who produce, how produce and the amount to produce

6. What does the government plans out in the command economy?

The government plans which factories to produce and the jobs that people will have and what to produce

7. Who decide how to use the resources of a country in a command system?

The government controls production, so he decides what to produced and the amount of resources to use for it

8. Who answers the questions of production in the pure market economy system?

The consumers, they choose trough their purchases, the quantity is produced and what produced

9. For whom produce the goods in the market economy?

People that they can pay the price of such goods

10. Who answers the production questions in the mixed economy system?

Private agents of households and companies

11. What's the meaning of "government regulation" in the mixed economy?

The government sets the prices or quantities of production. Besides, the government established the rules that citizens and companies must achieve for participate in this type of economy

12. Who consume the goods and services that business produce in the mixed economy? What happen with people that can't afford to consume them?

- People with the necessary incomes for it

- The government helps people that they can't pay such goods

Video 4:

Nearly every society in the world faces the fundamental problem, how to distribute limited resources to people in a way that will be fair and effective. This is what is called scarcity and different societies approach this problem in different ways. There are four essential types of economic systems.

·         The traditional economy is based on culture and rituals, and is focused on the community as a whole. Everyone pitches in and benefits from everyone else his efforts. Small societies focused on subsistence farming and hunting are considered traditional economies. An example would be a traditional Inuit village in North America.

·         A command economy relies on the government to make all economic decisions, including allocating and distributing resources and regulating prices and wages. A modern example of a command economy would be North Korea.

A market economy is driven by consumers whose decisions determine how the industries and financial markets will operate. Individuals choose how their resources are used what goods to make what services to provide and what jobs to take.

In a pure market economy there is no government involvement because of this there are no true pure markets economies.

·         Most societies today have mixed economies. Which utilize limited government involvement while also applying free-markets. One example would be the United States. However nearly all other countries are formed of mixed economy as well, each is unique and faces the challenge of finding proper balance between consumer choices and government control.

Activities:

1. What is the fundamental economic problem in every society?

One of the fundamental problems is scarcity of resources because the humans are misers and they can't use all the resources.

2. What kind of societies are considered traditional economies?

The traditional economy is based on culture and rituals, and is focused on the community as a whole. Small societies focused on subsistence farming and hunting are considered traditional economies

3. Which are the characteristics of a command economy? Example

The government is the one that he puts the price of the things and say what to produce, how to produce and for whom it is produce. Example: North Korea

4. North Korea economy. Explanation

In North Korea the is command economy. North Korea economy is driven by consumers whose decisions determine how the industries and financial markets will operate individuals choose how their resources are used what goods to make what services to provide what jobs to take

5. Which are the characteristics of the market economy? Example

The consumers. They are the only ones who answer to questions of production. So, when you're looking at what to produce, it is completely and totally up to consumers. When you look at how to produce it, businesses are the ones who choose what they're going to produce and then, if consumers don't buy, the businesses go out of business. And for who to produce these goods, it's based on consumer income. If they can afford it, they can buy it. There is no government regulations which means that absolutely nothing would be illegal. If there is a market for it, people can buy it, so there are no protections for consumers.

6. Difference between the mixed economy and the pure market economy?

That the mixed economy uses limited government participation and the market economy is driven by consumers decisions.