Transcript Chapter 6 To what Extent do Different Economic Systems Affect

Chapter 6
To what Extent do
Different Economic
Systems Affect
Quality of life?
Just Imagine…
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You are in charge of all the money coming into
your home every month
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What factors would you have to consider in
deciding how to spend that money?
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Everybody in you house will have different
ideas on what's important and what it should
be spent on
 That’s economics
A comparison
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We will looking at the economic systems of
Canada and its largest trading partner, the
United States
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What values shape these systems, how they
are different, and how they are the same
A brief lesson in economics…
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Cartoon, pg 199
 Why didn’t the manufacturer make more games?
 Why did the truckers go on strike?
 Why did the store decide to sell the game for less?
 Why would anyone buy it for $99.99?
What Values shape the mixed and
market economies of Canada and
the United States?
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The demand for super cyborg city was so great it
created a scarcity of the product
 Too many people wanted the product, and not
enough copies were available
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Some things people need are unlimited- ex air
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Most things that people need or want are limited.
This is because resources are limited
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In economics resources include, money (capital),
labour, and materials (resources)
What Creates Scarcity?
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Land
 Materials found in
the natural
environment
needed to produce
goods and
services, such as
renewable and
non-renewable
resources
 What
impacts
might this
decision
about using
the land
have on the
land?
•
Labour
 Labour consists of the physical and mental effort
needed to produce goods and services
 Construction workers building a house- if there
aren’t enough workers , fewer houses get built
How do choices
concerning jobs
effect the work
force?
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Capital
 Consists of money that people own or borrow, used
to purchase equipment, tools, and other resources
needed to produce goods and services
 Ex- setting up a plane production plant requires
money
What if the capital
that built this
airplane were
invested in
something else?
How might this
impact airports and
air services?
Economic Systems
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An economic system is a way to solve the basic
problem of scarcity
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Economic systems can be placed on a spectrum; their
spot on that spectrum depends on the underlying
values of that society
Spectrum of Economic
Systems
More government control
Less government control
Planned (Command or
Communist) Economy
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At this end of the spectrum, the government
makes all the decisions about how to solve
scarcity
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The Government owns and manages all the
resources needed to produce things
 Resources are publicly owned
 Government makes all decisions about
resources
 Individual consumers have little influence on
decision making
 Ex. Former USSR
Market (Capitalist or Free
Enterprise) Economy
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On this end of the spectrum, the choices of
individuals solve scarcity
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Private businesses manage and sell their own
resources
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Businesses succeed if they sell products consumers
want, otherwise they fail
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The government does not get involved
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Ex. The United States
Mixed Economy
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Combines private ownership and government
control
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Individuals and government make decisions about
what to produce
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The level of government involvement depends on
what political party is in power
 Liberal Party-More involvement
 Conservative Party-Less involvement
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Ex- Canada, Sweden
How did they end up this way?
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The Canadian and American economic systems are
very similar, but they developed from different
starting points
 Their starting points involved different answers to
the fundamental question “what’s the best way to
achieve the public good?”
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The Public Good and Cooperation
 The belief that individuals must consider each
other and set aside their individual differences
to achieve what’s best for society
 What style of economic system do you think
this idea fits?
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The Public Good and individualism
 the belief that what's best for each person
individually adds up to what best for society
 What style of economic system do you think
this idea fits?
History of the Different
Systems
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Canadian Economy pg 206-207
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How might the history of Canada shape the
value and attitudes in Canada?
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The U.S. Economy pg 208
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How might the history of the U.S. shape the
values and attitudes in the U.S.?
Supply and Demand
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Supply and demand
control the market system
through a cause-andeffect relationship related
to price.
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Supply and demand effect
quality of life because
they affect the prices of
products we buy, the
availability of products,
and jobs connected to
creating products.
Demand
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Demand is the quantity of a good that
consumers will buy. The demand for the good
is related to the price of that good
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Generally, the higher the price of a good, the
less people will want to buy and therefore, the
lower the demand. When something is
expensive, people will purchase less of it or a
substitute
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The opposite is also true: the lower the price of a
good, the more people will want to buy and the
higher the demand will be. When something is
cheap, people will want to buy more of it
Supply
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Supply is the quantity of a good that producers
are willing to make and offer for sale in the
market. The supply of a good is related to the
price of that good
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Generally, the higher the price of the good, the
more producers will want to make and the
greater the supply
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The opposite is also true: the lower the price of a
good, the less producers will want to make and
the lower the supply will be
Competition
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Competition is about striving to get
consumers to buy their products
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Producers attract consumers in a variety of
ways-price, product quality, and advertising
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Many factors can affect competition,
including the value of consumers and
decisions by the government to get involved
in decisions about supply and demand
 Ex: Coke vs. Pepsi, Ford vs. GMC, Nike, vs.
Adidas
 2 Donut shops case study- pg 212
Prices
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Prices in a free market system are
determined by the interaction of supply
and demand.
The price of a good
will naturally move to a
level where the
quantity demanded is
EQUAL to the quantity
supplied. At this point,
the market is said to be
at EQUILIBRIUM.
• In a free market
system, the equilibrium
price and quantity of
most goods are
constantly changing
as the market adjusts
automatically to
changes in the level of
supply and demand.
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Prices
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Firms are encouraged to increase
production of those goods that are in high
demand and to reduce production of less
popular goods
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Goods are made available to consumers at
the lowest possible price
 Ford Motor company grew because of
their ability to supply cars to the
consumers for a lower price due to the
invention of the assembly line
Why do Governments get
Involved in the Market
Economy?
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Market economies rely on the decisions of
individuals consumers and producers
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Sometimes the government may get involved
to inform, protect or ensure good and fair
practices
 Ex. The B.C. government started its own
auto insurance program because it believed
private insurance companies were to
expensive
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Can you think of any other reasons why the
government may get involved?
The Business Cycle
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The free market economy does not grow at a constant
rate. Instead, it goes through a continuing series of
“boom” and “bust” periods called the business cycle.
Boom (Peak) Periods
Bust Periods
- period of prosperity and
economic growth
- high level of employment
- wages and profits rise,
therefore spending
increases
- GDP (gross domestic
product) is high
- Problem: INFLATION
- Economic decline and crisis
- production decreases,
therefore unemployment
rises and wages fall
- consumers restrict spending,
therefore prices and profits
drop
- RECESSION – mild and
short lived downturn
- DEPRESSION – longer and
severe period of decline
The Business Cycle
Government Intervention
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Governments may intervene in the economy by
changing their level of spending and the supply
of money to try to even out the boom and bust
cycles (Keynesian Economics)
Entrepreneurs and Labour Unions
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Entrepreneur – a person who ORGANIZES a
business and takes the RISKS associated with
competing in a market economy
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They are the heart of the market system
Labour Union – an organization of workers that
ACTS to PROTECT workers’ rights and interests
 Unions can pressure employers about wages, work
hours, and workplace safety