Download Chapter 2 Section 3

Warm-up
1. If you could buy one thing in the entire
world – no matter cost – what would it
be?
Chapter 2
Section 3
Centrally Planned Economies
• In a centrally planned economy, the central
government rather than individual producers
___________,
and consumers in markets, answers the key
economic
___________
questions of production and
consumption.
bureaucracy
• A central ____________
makes all the decisions
what items to produce, _____
how
about _____
to produce
who gets them.
them, and ____
• It is up to the bureaucrats to ensure that each
materials
workers
firm has enough raw __________
and ________
to meet its production goal.
Government Control
land and capital
• The government owns both_______________,
labor
and in a sense ________
too.
where
• Farmers are told _________
to plant, _____
to
how
plant and where to send their crop. The free
self-interest and competition
market forces of __________
absent
are ________
from the system.
consumer voice in production and
• The lack of _________
distribution shows that under centrally planned
_________
sovereignty
economies, consumers do not have_________.
Socialism
AND political philosophy
• Socialism is a social ____
based on the belief that democratic means
distribute wealth evenly
should be used to ___________________
only
throughout a society. Real equality can _____
exist when political equality is coupled with
economic equality.
________
democracies and
• Socialist countries may be ___________
industries
usually the government owns major _________.
Karl Marx
• A social philosopher
who was critical of
capitalist
________
employers
for their emphasis on
profit
______
and
developed a plan for
classless society
a ________
which he called
communism.
Communism
• Communism is a centrally planned
ALL economic and
economy with ____
power resting in the hands
political ______
of the government.
• Unlike socialists, communists
authoritarian
governments are___________.
• Authoritarian governments require
obedience from their citizens
strict _________
freedom
and do not allow individual ________
of judgment and action.
The soviet union
• In the early 1900’s the USSR was most concerned with
national power and prestige. They allocated
building _______
armed forces
the best land, labor and capital to the_____________,
capital goods They
space program and production of____________.
created large state-owned farms. Aggie workers were
guaranteed employment and income…with ____
no
___________
incentives, individuals had few reasons to produce
more or _______
better crops, thus before long the Soviets
_____
could not feed all of its people.
• The state also owned heavy industry. Again, once
production ______
quota was met, there was no __________
incentive
to produce more quality goods. In fact, it was illegal to
exhibit entrepreneurial behavior.
scarce and poor
• Consumer goods were ______
quality. For example, a manufacturer
assigned to produce a certain number of
suits could loosely stitch the buttons and
forget the buttonholes and mismatch coats
and trousers…but still the state store had
accept
to ______
delivery of the suits and
no alternatives
consumers had_____________.
hours
Consumers would have to wait ______
in line
for goods. Items such as housing and food
was_________,
yet rarely available
affordable
• The breakup of the soviet
union in 1991 was partly due
to the collapse of its centrally
economy Mikhail
planned_________.
Gorbachev told the Soviet
people that their economy was
modernize
in trouble and must ________
to help productivity. The
economy grew worse, inflation
soared, goods were scarce
unrest
leading to political________.
Which of the following economic
goals are difficult to achieve in a
centrally planned economy?
1.
2.
3.
4.
Economic efficiency
Economic security and predictability
Economic equity
Economic growth and innovation
Ch 2.4 Modern Economies
How
much would you be willing to pay if
you had to buy a ticket to use roads and
highways? Or to have your house saved
from a fire? Or to send someone into outer
space? Or for this economics class (be
nice or to borrow a book from the
library? Or to play on the jungle gym at the
park? Or to have an officer help you when
your wallet is stolen?
mixed
• Today most economies are _______
economic systems.
1 economic system can adequately
• No ___
satisfy everyone’s wants and______.
needs
______
The Limits of Laissez Faire
• Adam Smith
believed that left to
its own devices, the
free market
__________
system
would provide the
greatest benefit for
_________
consumers and
raise the standard of
living.
laissez faire
• They followed__________,
government
the doctrine that _________
generally should not intervene
in the marketplace. However,
most still believed the need
limited
for a certain _________
degree of government
intervention in the economy
• Some needs
that markets
meet fall to
governments so
ALL
that _____
members of
society can
participate. Ex.
Education
protecting
• Governments create laws ________
property rights and enforcing contracts.
competition
Without laws insisting on___________,
many people fear some firms would
dominate others.
• This all depends on the opportunity cost of
pursuing each goal. Are you willing to pay
taxes to fund the army? To give money to
people without jobs? To give all people an
education?
Circular Flow Model: Mixed Eco
Circular Flow Model
• The structure of most modern economies
include__________.
government
2.8 million
• The government pays ___
billion
employees 9.7 ______
dollars a year for
their labor.
goods
• Governments also provide certain _____
and services. Ex. 4 million miles of roads
transfer money. Ex.
• Governments also _______
Social Security.
Sweden
• Sweden’s mixed economy has mixed benefits.
The government redistributes more than _____
half
social benefit
of Sweden’s wealth through ______
programs. When a child is born, his or her
parents are entitled to ____
450 days of parental
leave with __
¾ of their salary paid by the
government. Swedes _____
never pay more than
____
$170 a year for prescriptions. Your braces are
30 days vacation. Your
_____,
you get ___
free
__________
is that it is the second-highest tax
trade-off
burden of any industrialized country. ____
56% of
thedir inome is taxed versus the U.S. 32%...
_____
would you be willing to pay for these benefits for
the 24% difference?
Continuum of Mixed Economies
• Centrally Planned
Free Market
» Hong Kong
North Korea
Canada
France
China
United States
Cuba
Music Madness
• Suppose you are opening a new music
store in your town. What resources would
you need? (list 3) What would you offer?
(3 consumer goods) How would the
government affect your business?(3)
• North Korea v. Hong Kong
Economic Planners
•
•
•
•
North Korea and Hong Kong each have 5 idle
factories that must be brought up to full
production within a year. Answer the following
and how you arrived at your answers.
What will we produce?
To whom will we sell our products?
How will we find workers for the factories?
How much will we charge for our products?