Download Economic Systems and Development

Economic Systems and
Development
Page 618-625
Essential Skill:
Demonstrate understanding of Different
Economic systems by giving examples
Quiz coming up…
Economics
Factors of
Production
Scarcity
Three Basic
Questions:
What?/How? /Who?
Goods &
Services
Creates a
need for an
economic
system
And FINALLY… Define 4 types of economic systems,
and give an example of each kind.
How does every country in the
world deal with SCARCITY?
They create an economic system that
answers these questions:
• What goods and services to produce
• How will these goods and services be
produced
• Who will consume these goods and
services?
Traditional Economy:
Economy based on tradition and custom
Characteristics
• Follow family’s path
(less mobility)
• Little change over
time
Disadvantages
• Not very productive
• Does not adapt well
to new methods and
technologies
Example: Chad
Market Economy:
individuals and businesses own
resources & make decisions
Characteristics
• Freedom – to own
property and control
one’s own labor
• Competition – among
sellers; buyers look for
best quality & prices
• High GDP (Gross
Domestic Product); very
productive
Disadvantages
• Unsteady Growth – job
loss during recessions
• Profit-Driven –
– Focus on profit
– Poor working conditions?
Products made with child
labor?
– Negative externalities:
• Pollution
• Faulty/dangerous
products
• Example: CA drought &
water-guzzling
Command:
government owns resources and
makes economic decisions
Characteristics
• Resources used for
“greater good”
• Inefficient
• Low GDP per capita
Disadvantages
• Shortages
• Poor quality G&S
• Slow growth rate
China transitioning toward
Capitalism since 1970s…
Mixed-Market:
has elements of both
market and command economies
Characteristics
• Individuals, markets and
government all influence
the economy
• (U.S. a market-oriented
economy)
• Private ownership of
business + government
regulation and public
services
Disadvantages
• Depends on the “mix”
• Too much govt. regulation
stifles businesses &
innovation
• Too little govt. regulation
leads to income disparity,
fraud, pollution, poor
working conditions
Developed Countries
• Type: wealthy; high standard of living
• Characteristics: mixed market economies;
high per capita income & GDP; modernized
(strong industry & technology)
• Examples (35ish countries): U.S., Canada,
Japan, Germany, U.K. (roughly 35 in world)
Newly Industrialized Countries
• Type: growing economic powers;
industrialized
• Characteristics: good rate of economic
growth; growing export industries
• Country Examples: China, India, Mexico
Developing Countries
• Type: minimal economic growth; high number of
people living in poverty
• Characteristics: low income & GDP per capita; low
productivity; weak industry; many obstacles
• Country Examples: most countries in the world;
(Examples: Afghanistan, Cuba, Nicaragua,
Guatemala, most African nations)
• Question: Based on the ratio of developing to
developed countries, what can be inferred about the
standard of living of most people in the world?
• Most people live at or below the poverty level
Obstacles to Development
Be able to explain HOW each problem can hurt an economy.
High Population Growth
If # ppl increase faster than
GDP  fewer jobs available
& more poverty
Single-Resource Economy
Slow econ. growth; Country
vulnerable; any problem
with the resource can
destabilize economy
Severe Debt
Owe much $ to other nations
& can’t keep up; Spending
on debt repayment rather
than investing in economy
Trade Barriers
Meant to protect local
industries, but often protect
inefficient businesses,
hurting growth
War (What is it good for?)
Hurts growth by damaging
land, labor AND capital;
shortages occur; refugees =
loss of labor (“brain drain”)
Corruption
Leaders steal $ for selves, so
less $ to invest in economic
growth