Transcript Introduction to Political Science

Introduction to
Comparative Economic Systems
Honors Non-Western Studies
Mr. Tumino
Discussion…
• How would you define economics?
• What is an economic system?
• How does economics impact you?
Comparative Economics Systems
• The major economic systems are
traditional economy, market economy,
command economy and mixed economy.
• There are also countries that are said to
have developing economies, moving from
a traditional to a market economy.
Definitions
• Factors of production:
– Those things necessary to produce goods and
services.
» Land
» Labor
» Capital (money, buildings, equipment, etc.)
» Management
Definitions
• Traditional economy:
– An economic system in which the factors of
production are settled by rules accepted as good
and correct
– Normally used to describe economic systems
that pertain in societies with extensive
subsistence agriculture
– Used by members of industrialized societies to
describe societies deemed "underdeveloped"
Definitions
• Market economy:
– An economy in which the prices of goods and
services are determined in a free price system.
– A system in which buyers and sellers exchange
on the basis of supply and demand.
– Also known as a capitalist economy.
Market Economy
Definitions
• Command economy:
– An economic system in which decisions
regarding the factors of production are made by
government leaders.
Command Economy
Command Economies
• Two types of command economies:
– Communist—strict government
control of the entire society
Command Economies
– Socialist—three main goals of this type of
economy:
• An equitable distribution of wealth and
economic opportunity
• Society’s control, through its government,
makes decisions about public goods.
• Public ownership of services and factories
that are essential.
Definitions
• Mixed economy:
– A combination of market, command, or
traditional economy.
– A system in which free enterprise is
affected by government regulations.
Mixed Economy
Economic Decisions
• All economic systems must make three basic
economic decisions:
– What and how many goods and services should
be produced
– How should they be produced
– Who gets the goods and services that are
produced
Economic Decision Making
• These decisions are made differently in the three
major economic systems:
– Traditional—habit and custom determine the
rules.
– Market—this economy is based on free
enterprise, the idea that private individuals or
groups have the right to own property or
businesses and make a profit with only limited
government interference.
– Command—the government controls the
economy is this system.
Economics and Trade
• Countries with varying levels of economic
development have become increasingly
interdependent through world trade.
• Geographers and economists classify all of the
world’s economic activities into four types:
– Primary economic activities—taking or using
natural resources directly from the Earth
– Secondary economic activities—raw materials
are used to produce something new and more
valuable.
Economies and Trade
• Factors affecting trade:
– The unequal distribution of natural resources
– Differences in labor costs
– Differences in education levels
Economics and Trade
• Barriers to trade:
– Tariffs
– Embargos
– A quota on the quantity of a product that
can be imported from a country
• Many governments around the world have
moved toward free trade.
Gross Domestic Product
• GDP - Gross domestic product refers to
the market value of all final goods and
services produced within a country in a
given period. GDP per capita is often
considered an indicator of a country's
standard of living.
Gross National Product
• GNP - Gross National Product is the market
value of all products and services produced
in one year by labor and property supplied
by the residents of a country
GDP vs. GNP
• Gross National Product (GNP) is often
contrasted with Gross Domestic Product
(GDP). While GNP measures the output
generated by a country's enterprises - whether
physically located domestically or abroad GDP measures the total output produced
within a country's borders - whether produced
by that country's own firms or not.