Download *Chapter 4, Sec. 5

Chapter 4, Section 5
Name __________________________
Sequence ______
Economics: How different societies around the world meet their economic needs. Economists - study economics
What are the advantages and disadvantages of each economic system? Study These Notes!
Fill-In: Start with page 91 for 1 - 2. Then use the these Notes, Smartboard and textbook.
1. Consists of the production and exchange of goods / services among people 2. The way people produce and exchange goods / services -
______________________
_____________________________
3. Goods are those things that people make - food, shoes, toys, houses, and
_______________________
4. Services are those things that people do for others - doctors, plumbers, teachers, and
_________________
* Every society has limited resources, no society has enough goods and services to meet the unlimited needs and wants
of all its members. This problem of scarcity forces every society to answer three fundamental questions:
What should
be produced?
How should
it be produced?
Who should
get it?
Know these FOUR types of Economic Systems: Traditional, Capitalism, Communism, Socialism
Traditional Economy: Generally people do what their ancestors did and tend to be primarily agricultural often using
the “barter system”. They usually center around the family/tribal unit. Children often follow the example of his/her parents.
Major occupations consist of hunting, herding and 5. ________________ .
Examples - Bushmen of the Kalahari Desert, Berber tribesmen of Algeria and villages in South Asia
Main Features:
• Economic Decisions - customs/traditions determine what should be produced, how it should be produced and for whom.
• Production - based on custom/time-honored methods, new ideas are discouraged. Change/growth proceed slowly.
• Private Property - often no private property; things are owned by the family or village.
• Trade - goods/services are produced to meet the needs of members family/tribe. There is very little trade with outsiders.
Traditional economies are generally marked by subsistence agriculture and cottage industries.
6. _______________________ Agriculture - land usually produces only enough crops to feed the farmer‘s family. There
is rarely a surplus and economic growth is slow. (much of Africa, Asia and parts of Latin America)
7. ________________________ Industries in traditional societies people use their spare time in their home to weave
cloth, make furniture/clothes, and to produce hand goods. (families earn extra income during winter)
Free Enterprise: Also known as 8. _________________________ or the Free Market System where people own
their own goods and property. Some people invest their money in different ways(producing or distributing goods) so they may
gain a profit. Prices in a free enterprise system are established by the interaction of supply/demand.
9.
_______________ - how much of a good producers are willing to make/sell
10.
_______________ - how much of a good consumers are willing to buy
What happens to the price when there’s a large supply and low demand? 11. _________________________
There is limited 12. ___________________________ interference in the economy in a free enterprise system but
government plays a vital role. The government provides/enforces a set of common rules, maintains monetary system,
provides for the nation’s defense and protects people’s right to own property. Sometimes people look to government to
break up or regulate companies that have obtained to much power (monopoly).
Main Features:
• Private Property - people have right to own private property, use it as they see fit with limited government interference.
• Free Enterprise - people are free to take part in any business or sell any legal product. Businesses are also free to do
anything they wish in order to attract customers - such as lower prices, provide better quality goods, advertise, etc.
• 13. _____________ Motive - ability to make profits is what drives people to risk their money in starting a new business.
• Supply and Demand - the interaction determines prices. If the supply is high but demand is low, the price goes down.
When demand is high the price goes 14. __________.
Unlike traditional economies, free enterprise economies generally have 15. ______________________ Agriculture and
Industries. Farmers grow food in order to sell it to others for cash. Crop production is intended for distribution to
wholesalers and retailers. Large scale commercial agriculture makes production cheaper - farmers use tractors and other
equipment.
Examples - US, UK, France, Chile, Japan, Germany, Singapore
Communism: economic system where all important economic decisions are made by government leaders who decide
what, how, and for whom goods and services will be produced. The way goods are produced and distributed is controlled
by government leaders for the good of society as a whole. Government officials specify which goods each factory will
make (usually 5-year periods) called 16. ___________________ Plans.
[Communism was developed by Karl Marx who believed that business owners (capitalists) used their wealth to take
advantage of workers by taking away most of the value of what they produces. Marx predicted that the conditions of
workers would grow so bad that they would eventually rise up and overthrow their capitalist rulers in a violent revolution.
Workers would then establish an equal society and live in perfect harmony with no social classes.]
Main Features:
• Role of Government - all major decisions (production, distribution, resources) are made by 17. _______________ planners.
• Private Property - ownership is abolished, replaced by national ownership of all land, factories, farms, and resources.
• Cooperation - workers labor together and share equally. The economy is supposed to be run for the benefit of all. In
practice, government leaders run things to prepare for true communism.
• Major Goal - is to achieve a classless society; equality among all workers.
Example - North Korea
18. Which system has more of an incentive to reward
workers for harder work or better performance?
Free Enterprise
OR
Communism
19. ____________________ an economic system (like Communism) in which the most important businesses are owned
by the government (factories, mines, railroads, airlines, oil, banks, etc.). Unlike communism, socialism encourages private
ownership of some businesses (shops, manufacturers). Some economists refer to socialist economies as “free market
socialism” because these economies don’t involve state planning. Socialist disagree with the communist belief that
workers’ lives could only be improved through violent revolution. Workers could improve their own conditions by having a
government own basic industries and also provide essential services (free-schooling, low-cost housing, public transportation,
and national health program).
Main Features:
• Role of Government - should use its power to bring an end to poverty by taking control of the major resources and
providing public services.
• Economic Decisions - many decisions about production, distribution and resources are made by the government. Other
decisions are made privately.
• Private Property - major industries are owned by the government - other property is held privately.
• Major Goal - seeks a fairer distribution of income among society. People’s basic needs (health care, transportation
education, housing) are met for free or at very low cost.
Examples - China, Vietnam, Cuba(transitioning from communism to socialism)
Mixed Economies: In the real world, no economy totally follows any one economic system. Most countries have
economies that blend features of each.
20. _____ The features described in these boxes best describes the workings of a _ economy.
To make a profit drives people
to put their money at risk.
Producers determine the
supply of a product.
Consumers determine the
demand for a product.
A.
B.
C.
D.
traditional
free enterprise
socialism
communism
21. ____ Which of the following is NOT true
A.
B.
C.
D.
Government ownership of property is an essential characteristic of a communist economy.
The widest selection of consumer goods would most likely be in free enterprise.
Workers working in factories producing mass goods would be a cottage industry.
In Socialism, the government provides some free public services like schools and health care.
Types of Economic Activities: p. 92
• Primary - raw materials, the production of goods and extraction of resources (crops, grazing, fishing, logging, mining).
If the percent of people engaged in primary activities is high then country is probable less developed.
• Secondary - manufacturing/production of goods (textiles and furniture). Secondary activities add 22. ______________
to raw materials by changing their form.
• 23. ____________________ - deals with services performed by people and businesses. The US has more than 80%
of its workers that perform some service rather than produce a good.
• 24. ______________________ - economic activities consist of those involving information processing and management
like computer programmer or manager of a company.
“Less developed” countries - engage mainly in primary activities.
“Newly industrialized countries - engage in more secondary activities. Give example - 25. _______________________
“More developed countries - engage in tertiary or quaternary activities. Give example - 26. ______________________
27. ____ Which of the following is an example of a secondary economic activity?
A. growing corn on a farm for export
B. growing only enough food for one’s own family
C. working in a plant, manufacturing automobiles
D. managing a large multinational corporation
Role of Productive Resources: Economists identify FOUR types of resources that economic activities require:
Natural Resources, Human Resources, Capital Resources, Entrepreneurship
• Natural Resources - are materials on or in the earth such as water, soil, trees, fish, coal etc. that have economic value.
What are the three basic types? (Give examples of each) p. 93
28. _____________________________________
Examples ____________________________
29 ______________________________________
Examples ____________________________
30. _______________________________________
Examples sunlight, geothermal heat, winds, tides
• Human Resources - include all the human labor that is require to produce something. 31. Example _______________
• Capital Resources - are goods made, not to consume, but to make other goods and services. Machines and tools are
capital goods. 32. _________________________________ is a capital resource
(technology, transportation, communication, power, sanitation, etc. - the basic support system needed to keep an economy going.)
• Entrepreneurship - People who bring together and organize all other productive resources are called entrepreneurs
like business owners or managers.
Economic Indicators - tell how well an economy is performing.
• The 33. ____________ (p. 94-95) is the total value of all goods and services produced within a nation in a year.
• Gross Domestic Product per capita - A measure of the total output of a country that takes the gross domestic product (GDP)
and divides it by the number of people in the country. The per capita GDP is especially useful when comparing one country to another
because it shows the relative performance of the countries. A rise in per capita GDP signals growth in the economy and tends to
translate as an increase in productivity.
• The 34. ____________ is the total (worldwide) value of all goods and services produced by a country over a year.
Per Capita Income - is the average amount of 35. _____________ earned by each person in a political unit/country.
Industrialization - the growth of industry in a country/society; helped determine level of development when
manufacturing and machine power become widespread.
Human Development Index (HDI) - was developed by the United Nations (UN) as a tool for ranking countries based on
their level of economic development. This index classifies countries as: “less developed”, “newly industrialized”
(“middle developed”), or “more developed”.
Also the terms developing, nation in transition and developing nation are used on page 94-95 in book.
• 36. _________________________ Nations - countries with with a lower standard of living where the majority of people
work in subsistence agriculture (dominate in many Asia, African and Latin American countries)
Characteristics: low urban percentage, limited infrastructure, low per capital GDP, few people go to high school or
college, low literacy rate, low life expectancy, high birth rate/higher population growth rate, few doctors, more primary and
secondary economic activities
• 37. __________________________ Nations - countries with high levels of industrialization and high standard of living.
People work mainly in manufacturing, technology and service jobs. (US, Canada, Japan, Germany, Singapore etc.)
Characteristic: high urban percentage, low population growth rate, high per capita GDP, high levels of education, small
percent of farmers who engage in commercial farming(crops & livestock), high literacy rates, high life expectancy, good
health care, low birth rates, more tertiary and quaternary economic activities
Standard of Living - Country’s level of development based on quality of life - using income, life expectancy, literacy,
good health care, etc.
Per Capita
GDP
Life
Expectancy
Literacy
Rate
1. Australia
2. Japan
3. U. S.
$23,200
$24,900
$36,200
77-M / 83-F
78-M / 84-F
74-M / 80-F
100%
99%
97%
85%
79%
76%
524
682
778
1 per 389
1 per 522
1 per 365
4. Afghanistan
5. Haiti
6. Mali
$800
$1,800
$850
47-M / 45-F
48-M / 51-F
46-M / 46-F
32%
45%
31%
21%
35%
29%
4
5
4
1 per 6,690
1 per 9,846
1 per 18,376
7. Brazil
8. Mexico
9. Thailand
$ 6,500
$ 9,100
$ 6,700
59-M / 68-F
68-M / 75-F
65-M / 72-F
83%
90%
94%
81%
74%
21%
209
251
245
1 per 681
1 per 613
1 per 3,461
Urban
TV’s
per 1000
Doctors
Using the above chart, put the level of development for the 9 countries. The first one is done for you.
More Developed - countries 1 - 3
38. _________________________________ - countries 4 - 6 (Developing Nations)
39. _________________________________ - countries 7 - 9 (Nations in Transition)
40. _____ Using the chart which statement would NOT be accurate?
A.
B.
C.
D.
In general, women out-live men wether the country is less developed, more developed or newly industrialized
There are more doctors in more developed countries along with a higher literacy rate.
More people live in urban areas in less developed countries so they have more TV’s.
The more developed the country, the higher the income per person.