September 15, 2008
Determine whether the following nation possess a
mixed or command economy.
Modern Great Britain
Modern United States
Sponge Activity (continued)
Scarcity forces societies to answers three key economic
questions. What are the three key economic
Objectives key economic questions of what to
Identify the three
produce, how to produce, and who consumes what is
Analyze the societal values that determine how a
country answers the three economic questions
Explain the characteristics of traditional, command,
and market economies and describe the societal values
that influence them.
Scarcity And Economic Systems
Scarcity forces societies to answer difficult questions.
Indeed, in some places, people cannot even meet their
As a result of the problem scarcity, different economic
systems have evolved.
An economic system is the method utilized by a
society to produce and distribute goods and services.
Three Key Economic Questions
Due to scarcity, every society must answer the
following three key economic questions:
What goods and services should be produced?
How should these goods and services be produced?
Who consumes these goods and services?
What Goods/Services Should Be
Produced? decide what to produce in order to
Each society must
satisfy its needs and wants.
Although people obvious must provide for basic
necessities, such as food and shelter, one must also
consider national defense, education, and public
health. Also, one must determine what consumer
goods to produce.
Each production decision a society makes comes at an
How Should Goods/Services Be
There are countless ways to create the things we want
and needs. However, all methods require land, labor,
These factors of production can be combined in
different ways. It is the goal of societies to produce the
most of a good or service using the least amount of
production factors possible.
Who Consumes Goods and
The answer to the question of distribution is
determined by how societies choose to distribute
Factor payments are the income people receive for
supplying factors of production, which include land,
labor, capital, or entrepreneurship.
Who Consumes Goods and
Services? of who gets to consume which goods and
services is the primary difference between the various
economic systems of today’s societies.
Each society attempts to answer the question of
distribution, as well as the other two questions, based
on its unique combination of social values and goals.
Societies seek to answer the questions and pursue
certain goals, to some degree, at the expense of the
Economic Efficiencyand therefore, the
Scarcity is a perpetual condition,
use of resources always involves an opportunity cost.
Thus, most societies try to maximize what they can get
for the resources they have at their disposal.
If a society can accurately assess what to produce, it
increases its economic efficiency.
Economic systems of different nations allow different
degrees of economic freedom. However, most people
in the world face limitations on economic freedom.
In the United States, economic freedoms enjoyed by
citizen spark feelings of patriotism, which is a love of
Economic Security and
Predictabilityseek to reassure people that
goods/services will be available when needs and that
payments can be expected on time.
People also want help available for the elderly, poor,
Also, most people feel that governments should
provide safety nets, or programs to protect people
experiencing harsh economic conditions.
Economic Growth andimprove its standard
A nation’s economy must grow to
of living, or level of economic prosperity. The economy
must also grow to provide new jobs and income for
Innovation plays a pivotal role in economic growth.
Innovations in technology increase the efficiency of
production and usher in new goods/services
A society may value environmental protection,
universal medical care, and other important concerns
in addition to the aforementioned goals.
All nations prioritize economic goals based on the
wants and needs of their particular society, but
achieving any economic goal comes with some
Traditional Economy custom, or ritual
A traditional economy relies on habit,
to decide what to produce, how to produce it, and
whom to distribute it to.
There is little room for innovation or change.
Traditional economies are usually communities that
tend to stay close and small.
Agricultural and hunting are the cornerstones of the
people’s lives, laws, and religious beliefs.
In a market economy, economic decisions are made by
individuals and are based on exchange.
The choices made by consumers determine what gets
made and how, as well as who consumes the
Market economies are also called free markets, or
In centrally planned economies, the central
government alone decides how to answer the key
Sometimes referred to as command economies,
centrally planned economies possess a central
authority that is in charge of the economy
Mixed economies are market-based economic systems
in which the government plays a limited role.
Most modern economies are mixed economies.
Quickly, divide the class into two teams. Each teams sends
a member to board to answer the question for the round.
The team member at the board who raises his or her hand
first answers the question. The person who answers the
question correctly picks the next question. The person who
picks the very first questioni s determined by coin toss.
The individuals are allowed to ask their teammates for
help, but this venture uses up time.
Vocabulary Concepts Economic Main Ideas
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