Transcript Geography Unit 2x

ECONOMIC SYSTEMS
What is an Economy? What might an Economic
system refer to?
ECONOMY
Economy: An economy is the system of production,
consumption, and trade of goods and services.
Economic System: The production, distribution, and
consumption of goods and services in a particular society or
area.
So what then is Economics?
https://www.youtube.com/watch?v= 3ez10ADR_gM
ECONOMICS
 Economics is defined as the study of how goods and
services are produced and distributed.
 There are usually not enough essentials or luxuries
to satisfy all the needs and wants of a whole society.
 This leads to the economic principle of scarcity, by
which decisions about production and distribution
are based either on traditional factors, market
forces, or government decree.
TRADITIONAL ECONOMIC SYSTEM
An economic system in which decisions
are made on the basis of customs,
beliefs, religion, habit, and so on.
In traditional societies, scarce goods are
often shared evenly, or else on the basis
of age and gender.
https://www.youtube.com/watch?v=B43Y
EW2FvDs
TRADITIONAL ECONOMY
1.
Allocation of resources is based on rituals, habits, or customs
2. Roles are defined by family
3. People work together for the common good
4. Little individual choice
MARKET ECONOMY
An economic system in which individual
producers own and determine the
production, distribution, and
consumption of goods and services.
In market economies, products and
services generally go to those who can
afford to pay for them.
MARKET ECONOMY
FREE MARKET ECONOMY
1. Private ownership of property/resources
2.Business decisions are driven by the desire to earn a profit
3.There is a great deal of competition.
4.Consumers have many choices
COMMAND ECONOMY
An economic system in which the
government owns and controls all facets
of the economy.
Command economies usually satisfy the
needs and wants of an elite class which
controls the government and decision
making.
COMMAND ECONOMY
1.
2.
3.
Central ownership of property/resource
Centrally planned economy
Lack of consumer choice
Example: Cuba and Former Soviet Union
MIXED ECONOMY
An economic system that uses
aspects of more than one of the
three basic types of economic
systems (subsistence, command,
and market).
MIXED ECONOMY
1.
2.
3.
4.
Individuals and businesses as decision makers for the private
sector
Government as decision maker for the public sector.
A greater government role than in a free market econom
Most common economic system today
Examples: England, Germany, Russia
CANADA’S ECONOMIC SYSTEM
It is important to know that the majority of
countries have some combination of the three
economic systems outlined above.
The mixed economy usually blends free
enterprise (the market economy) and
government control (the command economy).
Canada is a good example of a mixed economy,
with individual profit-seeking coupled with a
government that taxes and spends for social
services.
ESSENTIAL FEATURES
 Incentive of equality for all people
 Public and private ownership of property
 Private ownership = feeling of control, provides
incentive
 Public ownership = ideals of equality and economic
strength is promoted (usually in areas of national
importance, areas of high risk or to protect
employment)
 Joint ownership is often favored
 Government controls and subsidies
 Redistribution of wealth
 social programs and progressive taxation, direct and
indirect taxation (GST, airline fuel taxes)
CHALLENGES
Paying the price for social programs
Difficult to raise taxes and lower social
programs during economic upswing (hurts
middle class)
Large bureaucracies
FUNDAMENTAL ECONOMIC QUESTIONS
 Recap of Economic Systems
 https://www.youtube.com/watch?v=B 43YEW2FvDs
THE FIVE ECONOMIC QUESTIONS
 Businesses have a main goal of making a profit through either
providing A) Goods or B) Services.
 When creating a business there are 5 basic questions that
need to be considered before anything else. The same goes
for greater Economies, they need to answer the same
questions.
THE FIVE FUNDAMENTAL QUESTIONS
Who Produces Goods and Services?
What Goods and services are Produced?
How are goods and services produced?
For whom are they being produced?
How these goods and services distributed?
TASK
On page 70 and 71 you will find further details
of these 5 questions
Read each of the 5 sections and answer the
questions posed in the paragraph.
Full sentences please.
You will be developing on these soon, so make
sure you put time and effort into them.
4 RESOURCES AND 4
INDUSTRIES
RECAP: THE THREE TYPES OF
ECONOMY
Read pages 75-86 and define the following terms
- Market Economy
- Supply and demand
- Economic Depression
- Traditional Economy
- Subsistence Farmers
- Marginal Lands
- The Command Economy
- Military Dictatorship
- Communism
FOUR ECONOMIC RESOURCES
 All economies answer the 5 key questions, but they must also
think about the availability of the 4 key resources
 What do you think these might be?
 What four things can an Economy need to function?
FOUR RESOURCES
 1) Land Resources:
 Means more than just property, it means the raw resources of
the Earth
 Includes Soil, water, forests, animals, minerals and energy
sources
 While Canada has an abundance of these resources, other
countries are not so lucky
2) Labour Resources:
 PEOPLE!
 This does not just refer to a labour force in general, but also
dif ferent levels and skills of the labour force
FOUR RESOURCES
 3) Capital Resources
 Capital means both Investment Money and the goods that it
can provide
 Capital goods are goods such as factories or transportation
systems that are used in the production of other goods
 It is due to the large amounts of Capital needed for large
companies that often foreign investment is required
 This is money that is invested by people or corporations in
other countries, leading more towards a global economy
 4) Entrepreneurship:
 If the abilities of entrepreneurship are weak in a country, it
can lead to a very poor economic system, especially in a
Market economy
CANADA’S ECONOMY AT WORK
 All levels of government in Canada ef fect and play a role in
the economy because they collect tax money and spend
 For example, in 2006 Ottawa collected a total of 220 Billion
dollars in tax money, and then decided how to spend this
 This income is known as Revenue: The amount of money a
government recieves as income
 What types of things would the government spend this money
on?
OTHER INFLUENCES
 Consumer and Producer groups
 These are larger corporations that in some way regulated the
sale of Goods and Services in Canada
 Consumer: a person or organization that purchases and uses
products and services
 Consumer Groups: Buyers that take an interest in the quality
of goods and services produced by companies
 For example the Consumers Association of Canada – Tests
food and health issues and monitor prices for things such as
Gas
 For example, if a food was found to be overly unhealthy, the
CAC could call for it to be tested and checked by the
government
PRODUCER GROUPS
 Sometimes groups that produce the same product come
together to regulate their sales and quality
 This is fairly common in the agricultural world
 They organize the production of goods so that there is a
continually stable market and price.
 It is because of these groups that there are regulations on
some types of good such as Milk and Eggs
 Marketing Board: An organization created by producers to
promote their product and to maintain fair prices by
controlling controlling supply
TASK
 You have the rest of the lesson to work on your assignment
FOUR TYPES OF
INDUSTRY
THREE T YPES OF INDUSTRY
 Primary Industries
 Secondary Industries
 Tertiary Industries
 For our purposes, we will only be looking at these three main
industries, there are other types of classification such as
Quaternary
INDUSTRY HAS 4 SECTORS...
Secondary
Primary
Tertiary
PRIMARY INDUSTRIES
These industries take raw
materials from the environment.
Logically primary industries are located in
parts of Canada where resources are found
Examples of Primary Industries
 Mining, Fishing, Forestry, Agriculture
With out these industries Canada’s economy
exist in its current form
However, there is a very small percentage of
Canadians that work in primary industries.
• The primary sector of
industry is also called
extraction.
• It generally involves
changing natural
resources into primary
products.
• Most products from this
sector are considered
raw materials for other
industries.
Primary industry is a larger sector
in developing countries; for
instance, animal husbandry is
more common in Africa than in
Japan.
SECONDARY INDUSTRIES
 Secondary industries process the raw materials into finished
goods.
 The most important secondary industry is manufacturing.
MANUFACTURING
Often involves more than one stage of
processing.
Example: iron ore, limestone and other metals
are all needed to make steel (primary
manufacturing). The steel is then used to
make other things.
Manufacturing industries are located in
populated areas because they want to be near
their customers.
 The closer they are the less transportation costs
there will be.
The secondary sector
(manufacturing) produces finished,
usable products.
This sector of industry generally
takes the output of the primary
sector and manufactures finished
goods or where they are suitable
for use by other businesses, for
export, or sale to domestic
consumers.
36
* Aerospace
manufacturing
* Automobile
manufacturing
* Brewing industry
* Chemical industry
* Clothing industry
* Electronics
* Engineering
* Energy industries
* Metalworking
* Steel production
* Software engineering
* Telecommunications
Industry
TERTIARY INDUSTRIES
Tertiary industries provide services that
support the primary and secondary industries
and society in general.
Three times the number of Canadians work in
Tertiary and Quaternary Industries than in
Primary and Secondary Industries combined.
Examples: stores, newspapers, restaurants,
government
The tertiary sector of industry is
also known as the service sector or
the service industry.
It involves the provision of services
to businesses as well as final
consumers. Services may involve
the transport, distribution and sale
of goods from producer to a
consumer, or may involve the
provision of a service, such as in
pest control or entertainment.
38
News media
Leisure industry/hotels
Consulting
Healthcare/hospitals
Waste disposal
Estate agents
Business services
Restaurants
Local government services
Central government services
Education
Law and order
THE MULTIPLIER EFFECT
 Some local economies are based purely upon the Tertiary
industry
 This happens often in tourist centers such as Niagara Falls or
places like Las Vegas
 Tourists bring in the money and that money is then redistributed
through the local economy.
 This is called the Multiplier Ef fect
 It is when money created within an economy is then put back into
it, thereby multiplying the number of people who benefit from it
 Basic Industries – bring money into a community. Ex. Mining
 Non-Basic Industries – recycle money around in a community. Ex.
A restaurant
 A communities economic development and sustainability
depends on basic industries.
TECHNOLOGY AND INDUSTRY





As technology develops so too do many dif ferent industries
How do you think technology can be used to alter:
The Primary Industry?
The Secondary Industry?
The Tertiary Industry?
CONTINUE TO WORK ON ASSIGNMENT
 Your mapping assignments will be handed back tomorrow
 This Friday I will be handing out the CCT and final project, it
will not be due until January 11 th
 You will have some time to work on it after the break, but you
should be starting on it over Christmas holidays.
CANADA’S WORLD TRADE
What types of things to you think Canada trades to
other countries?
What do we bring in from other countries?
What does Globalization mean?
https://www.youtube.com/watch?v= 5SnR -e0S6Ic
Terms
•
•
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•
•
•
•
•
•
•
•
Imports
Exports
Trade Surplus
Trade Deficit
Net Exports
Net Imports
Tariff
Protectionism
Free Trade
Globalization
Multinational Corporations
Import
• Import – a product or service that is
brought into a country from another
country
• In Canada, we import many goods and
services from other countries
• These include cars, clothes, electronics,
machinery and equipment
• In 2008, Canada’s imports totalled $415
Billion in 2011 – $403 billion
• 52% of our Imports come from the USA
IMPORTS CONTINUED…
China 13%
Mexico11%
Japan 9%
Germany 6%
UK
Korea
France
Italy
Taiwain
Export
• Export – A product or service produced in
one country that is sold in another country
• In Canada, we export many goods and
services to other countries
• These include oil, natural gas,
telecommunications equipment, pulp and
paper, plastics.
• In 2008, Canada’s exports totalled $459
Billion - In 2011 – $399 billion
• 75% of our Exports go to the USA
UK 4%
China 3%
Japan 2%
Mexico
Germany
Korea
Netherlands
Brazil
Norway
Trade Surplus
• Trade Surplus
• Where a country has bought (imported)
less in goods and services than it has sold
in exports
• IE. Exports are > than Imports
• In 2008, Canada had a $44 Billion Trade
Surplus (with the rest of the world)
Trade Deficit
• Trade Deficit
• Where a country has bought (imported)
more goods and services than it has sold
for export
• IE. Exports are < than Imports
• In 2008, the United States had an $840
Billion Trade Deficit (with the rest of the
world)
Importance of Exports
• Why must Canada export?
• Three Major reasons:
• 1) To pay for things that we import
• In order to continue to pay for the products
we enjoy from other countries, we must
have to pay for them by selling our goods
overseas.
Importance of Exports
• 2) To Keep Our Economy Healthy
• Almost 50% of the goods and services that
Canadians produce are exported.
• With fewer exports, unemployment will be
higher, and many of us would be poorer
• 3) To keep the prices of Canadian made
goods lower for consumers
• The cost of a good or service becomes
cheaper as you make more of it.
• Thus the more we export the cheaper the
product will be for all Canadians.
Free Trade vs. Protectionism
• This debate was a hot topic during the
1988 election in Canada.
• On one side, the Progressive
Conservatives under Brian Mulroney
wanted free trade agreement with the
United States
• On the opposite end, the Liberals and
NDP wanted to continue the governments
“Protectionist” policies that had been in
existence since 1867
Mulroney Government
– Free Trade with USA
Protectionism
• Prior to 1988, the Canadian government
provided Canadian businesses with
policies that would protect them from
competition with foreign companies
• Protectionism – is a government policy of
using tariffs and having rules that limit
imports
• This helps Canadian companies gain an
advantage over foreign companies that
produce goods and services more cheaply
Tariffs
• Tariffs – is a tax on an import
• Tariffs make it more costly to buy a foreign
made good or service.
• Tariffs can make trade with other countries
more difficult, since they will also place
tariffs on your nations goods and services
• Tariffs will allow Canadian companies an
advantage, since their goods are not taxed
• Less imports will increase the Canadian
balance of trade with other nations
Free Trade
• Since 1988, this has been promoted by
the Canadian government with the USA
• Free Trade – is a government policy that
eliminates tariffs and other laws designed
to restrict trade
• The basic idea is that free trade enhances
trade for Canada with other nations
• This can result in more exports for
Canadian products with other countries
• It also has resulted in many jobs leaving
Canada for other nations
Free Trade vs. Protectionism
•
•
•
•
Free Trade
Imports increase
Exports may increase
Cheaper foreign
goods
• Fewer Canadian jobs
in manufacturing
• Money leaves
Canada
• More foreign
ownership and
investment
•
•
•
•
Protectionism
Imports decrease
Exports decrease
Expensive foreign
goods
• More Canadian jobs
in manufacturing
• Money stays in
Canada
• Less foreign
ownership and
investment
Free Trade vs. Protectionism
• Signed in 1988 between Canada and the
United States
• Allowed the elimination of tariffs for goods
and services sold between Canada and
the United States
• Allowed for easier rules for Canadian and
USA investment (foreign ownership)
• It resulted in increased trade between
Canada and the United States
• Exports grew from 40% to 50% between
1990-2000 (78% today)
FREE TRADE
AGREEMENTS
https://www.youtube.com/watch?v=
s_iwrt7D5OA
Free Trade Agreements
• NAFTA was signed in 1993
• NAFTA – North American Free Trade
Agreement (Canada, USA, Mexico)
• This agreement now includes Mexico in a
free trade zone with Canada and the USA
• WTO – World Trade Organization
• Founded in 1995
• It is an organization that is designed to
promote free trade, and resolve trade
disputes between the 120 member nations
NAFTA Today – Canada, the United
States and Mexico
NAFTA: FREE TRADE
ISSUE
SUPPORT
OPPOSITION
Agreement helps Canadian
resources exporters, but hurts
manufacturers that produce for
Canada only
EFFICIENCY
Trariffs protect inefficient producers
which pushes prices up for consumers
JOBS
Jobs will move to lower wage cost
Low-skill jobs will be replaced with highareas of Mexico and S. United
skill jobs that pay better
States
COMPETITIVENESS
Canada can complete with the US and
Mexico because of high productivity,
good transportation and cheap power
Canada will have to cut wages and
benefits to be able to compete with
American and especially Mexican
companies
OPPORTUNITIES
Canadian companies can bid on
American and Mexican government
contracts
American companies can bid on
Canadian government contracts
NA environmental quality will improve
since Mexico is required to meet
American/Canadian standards
Environmental quality is likely to
decline since standards in Canada
will have to be relaxed to allow
Canadian companies to be
competitive
ENVIRONMENTAL
IMPROVEMENT
Dark Green: Members Light Green: Draft Working Party Report or Factual
Summary adopted
Yellow: Goods and/or Services offers submitted
Pink: Memorandum on Foreign Trade Regime submitted
Brown: Observer, Red: Frozen procedures or no negotiations in the last
Grey: No official interaction with the WTO
Import Substitution
• Import Substitution – When a consumer
chooses to buy a Canadian made product
over a foreign made good or service
• Ex. Ontario agricultural products
• “Good things grow, in Ontario”
• Can also be involved in purchasing a
Canadian made Car (Ford Canada,
General Motors Canada, Chrysler
Canada, etc)
Effects of World Trade
• As world trade expands, the global village
becomes smaller since many nations now
rely on each other for trade.
• Globalization –
•
is the process of international integration arising from the interchange of
world views, products, ideas, and other aspects of culture. Advances in
transportation and telecommunications infrastructure, including the rise of
the Internet, are major factors in globalization
•
– this can be positive and negative
• Multinational Corporations – large
companies that operate across the entire
globe
Problems with Globalization
• As developed nations increase their free
trade agreements, many jobs will end up
in developing nations with cheaper labour
costs
• Since developing nations will need the
capital (money) and business to develop, it
is easier for the Multinational Corporations
to exploit them
• Ex. Child labour, environmental
degradation, human rights abuses
• https://www.youtube.com/watch?v=s_iwrt7
D5OA
Future of Canada’s Trade
• International Trade allows Canadians to
enjoy a high standard of living.
• 1/5 of Canadians work in a occupation
related to exporting goods and services to
other nations
• Canadian resources (oil, gas, forest
products) will continue to be sold as the
developing world industrializes
• Canadian manufacturing will continue to
grow in high tech fields, while it will
contract in low tech fields
Future of Canada’s Trade
• While the Canadian service (tertiary)
sector will grow in high tech jobs, it may
also contract in some areas
• Banking, finance and research and
development are seen as growing sectors
that Canada will see growth in the world
economy
• Other areas, such as call centres or
administrative jobs may go to developing
countries as their access to education
increases
QUESTIONS
1) What is the dif ference between an import and an export?
2) Why are Exports important? Name and explain the 3
reasons.
3) Who was Brian Mulroney and what did he do for Canada?
4) Name one good result and one negative result for A) Free
Trade and b) Protectionism
5) Explain the ef fects of creating organizations such as NAFTA
and W TO