Transcript Economic Systems in Southwest Asia

SS7E5 The student will analyze different economic systems.
Compare and contrast the economic systems in Israel, Saudi Arabia, and Turkey.
3 Type of Economies
 Traditional
 Command
 Market
 Most countries are not purely any of these. That is why
we have a 4th type, called Mixed.
Economic Continuum
Most economies have elements of both
systems. So, most economies are Mixed.
However, they may lean closer to one or the
other.
Command
Market
Israel’s Economy
 Mixed, but on the Market side.
 What to produce? A large portion of Israel’s GDP comes
from high tech manufacturing, financial services, and
agriculture.
 How to produce? Israel has substantial government
ownership of business, but is gradually privatizing
companies.
 For whom to produce? The private sector produces goods
and services for domestic and international markets based
on the market price system.
Saudi Arabia
 What to produce? World’s leading producer of OIL.
petrochemicals, mining, and refining.
 How to produce? Over 95% of the oil industry in the
country is operated by the government. Most other
major industries have significant government involvement.
 Since the 1980s, the Saudi government has been trying to
increase private ownership of business
 For whom to produce? 1/3 of Saudi Arabia’s GDP is based
on exports to other countries. (This is due to the
economy’s reliance on the oil sector.)
Saudi Arabia Continued
 1/3 of labor force are specialized labor from other
countries.
 Some private industry, but much is owned by the
government.
 Does this type of economy look more like a Command
or Market?
Turkey
 What to produce? Turkey has a diversified economy
with large service, manufacturing, and agricultural
sectors.
 How to produce? Since the late 1980s, Turkey has
gradually moved from a government directed economy
to more private enterprise….still mostly government
directed.
 For whom to produce? 1/5 of Turkey’s production is
exported. The remainder is consumed by domestic
consumers and the government.
Turkey Continued
 Where on the Economic Continuum would Turkey
fall?
Iran
 What to produce? Major Oil Producer , but also good
in manufacturing, textiles, building products, and
agriculture.
 How to produce? Some private companies, but the
government maintains tight control of most
industries.
 For whom to produce? Oil is exported, but economic
sanctions are hurting the economy.
Specialization
 Occurs when one country can produce a good or
service at a lower opportunity cost than another
country.
 This encourages trade with other countries
 It helps the economy
 Do you think Over Specialization could be a problem?
Why?
Anything that slows down or prevents one country
from exchanging goods with another
A tariff is a tax placed on goods when they
are (imported) brought into one country
from another.
The purpose is to make the imported item
more expensive than a similar item made
locally.
When one country announces that it will no longer
trade with another country in order to isolate it and
cause problems with that country’s economy. This
usually happens when two countries are having a
political dispute.
OPEC
 Organization of Petroleum Exporting Countries
 Iran, Iraq, Kuwait, Saudi Arabia, Qatar, Libya, Algeria,
Angola, Venezuela, UAE, Nigeria, Ecuador
 Influences the price and supply of oil
 Not all Middle Eastern countries are a part of OPEC
 Not all OPEC countries are from the Middle East
 If Supply
, what happens to Price???
Human Capital
 The work force
 Education and Training
 Knowledge and skill that make it possible for workers
to earn a living producing goods and services.
GDP
 Gross Domestic Product
 The value of all goods and services produced in a
nation in a given year.
Human Capital and GDP
 Does Literacy and Education have an impact on GDP?
Explain.