define the term economic system, opportunity cost, demand, supply.
describe and identify the three basic questions of economics.
list the four main types of economic systems
discuss the types of economic systems from which countries may choose in pursuit of their economic goals
INTO THE LESSON
Economic systems is a programme in which a country uses its resources to produce goods and services, and the manner in which these goods and services are distributed for consumption to maximize the benefits to its society. Economic systems vary worldwide. In this lesson we will discuss four types. These are the
Traditional (Subsistence) Economy
Free Market, Capitalist, Laissez-fare Economy
Planned Economy
Mixed Economy
Governments choose particular economic system that will effectively manage their economies, bring about economic growth and improve the lifestyles of its citizens.
The following economic questions must be answered by managers of economies.
1. What to produce? 2. How to produce? 3. For whom will the goods and services produced?
In this economy, private individuals own the greater share of the property and capital resources that are used in the production process. There is little or no government intervention in the economic activities of the country. The government may provide essential services e.g. transportation and water. Therefore the private sector provides the majority of goods and services.
Benefits
Competition among companies prices down.
Producers are free to use the factors of production in way they consider to be most suitable to them.
Consumers are free to spend money in any way to give them maximum utility.
A large variety of goods or services are made available to consumers.
There is greater efficiency in the use of factors of production, since market forces determine the allocation of resources.
Limitations
1. The profit motive drives the economy and thus encourages unequal distribution of wealth. 2. Large sums of money are spent on advertising, which creates artificial demands and increases prices. 3. Monopolies develop and these can exploit consumers since they can decide on higher prices. 4. Social and merit goods, for example, health, education and security may not be adequately provided. 5. Trade unions may be suppressed since capitalist may seek to suppress wages in order to minimize the cost of p production. 6. Demerit goods may be overproduced.
Activity 1: This activity will reinforce your knowledge on the benefits and limitations of the Market Economy
merit
demerit
competion
goods, services
monopolies
unequal distribution of wealth
artificial demand
governmental involvement
Complete the following sentences using these terms above. Answer the questions in your notebook.
There is limited ____________________________________ ____________________ in this type of economy.
Prices are kept down because of ________________________________________________________________.
Consumers have a wider variety of _______________________________ and _________________________.
Because of profit motive there is __________________________________________________________________.
Market economy are not driven to produce ________________________________________ goods.
________________________are generally present.
__________________________ are usually overproduced.
Activity 2:
This activity will help you to identify market driven economies and also reinforce the features of the market economies.
Clues
Across 2. The person who decides how to produce the goods and services 6. The foregone value of an economic decision 9. ___________ for the commodity determines whether it will be produced or not
Down 1. Not having enough natural resources 3. The manner in which a society is organized to solve economic problems. 4. A situation that brings buyers and sellers together to transact business. 5. Desires for goods and services 7. Free market economies are driven by this 8. The group that determines what to produce
Homework
1. Click the button below the questions to watch the video about Economic systems. 2. Write down the three questions that a) The Command Economy has to answer and b) The Mixed Economy 3. Record the a) characteristics b) Benefits and c) Limitations of both economies.