The Four
Questions
7th Grade Social Studies
Civics Standard 7
Copyright 2014 by Paul Blankenship
Alabama Civics
Standard 7
• Determine how people organize economic systems to address
basic economic questions regarding which goods and services
will be produced, how they will be distributed, and who will
consume them.
• Using economic concepts to explain historical and current
developments and issues in global, national, state, or local
contexts. Example: increase in oil prices resulting from supply
and demand.
• Analyzing agriculture, tourism, and urban growth in Alabama
for their impact on economic development.
Economics
• Economics is the study of the production,
consumption, and distribution of resources.
• Four basic questions define economic systems.
• We will examine an example of how economics
influenced historical events.
• We will discuss agriculture, tourism, and urban
growth in Alabama and their impact on economic
development.
The Four Basic
Economic Questions
• What goods and services will be produced?
• How will goods and services be produced?
• How much (or how many) will be produced?
• Who gets the goods and services produced?
Three Economic
Systems
• Traditional economy
• Command economy
• Market economy
Traditional Economy
Defined
• A traditional economy
• Has little technological innovation -technology remains about the same from
generation to generation
• Uses primitive tools and techniques for
subsistence farming
• Is usually rural
• Wealth and jobs are often inherited
Traditional Economy:
What to Produce?
• Traditional economies must focus on the
production of food because they are inefficient and
do not produce enough excess food to support
much specialization of labor. Most people are
farmers, a few may be craftsmen, and a very small
group may serve as religious or political leaders.
Traditional Economy:
How to Produce?
• Traditional economies use the same methods to
produce goods (mainly food) from generation to
generation.
• The most primitive remain hunters and gatherers.
• More advanced traditional economies have
adopted agriculture.
Traditional Economy:
How Much?
• Traditional economies may struggle to produce
enough food to avoid starvation.
• The lack of technology limits production because
resources are not multiplied by the use of
technology.
Traditional Economy:
Who Gets?
• In traditional economies families struggle to
produce most of the things they need, including
clothing and tools.
• Excess food, when available, may be traded for
goods that the family cannot produce, such as
horseshoes or nails made by the village blacksmith.
• Inheritance decides who gets land, jobs, and
leadership status.
Command Economy
Defined
• A command economy is controlled by central
planners in a government.
• Supply and price are decided by government
bureaucrats.
• Command economies promise economic security
and stability through planning (limiting freedom);
historically this has not worked.
• The Soviet Union was a planned economy.
Command Economy:
What to Produce?
• The government decides what will be produced.
Command Economy:
How to Produce?
• The government decides how goods and services
will be produced.
Command Economy:
How Much?
• The government decides how much to produce.
Command Economy:
Who Gets?
• The government decides who gets the goods and
services that are produced.
• Historically, the Communist Party members got
the best and most of what was produced,
leaving their “comrades” to stand in long lines
for stores with mostly empty shelves.
Market Economy
Defined
• Market economies are free from government
interference and operate on the basis of supply and
demand.
• The government has a “laissez-faire” policy -- it
does not attempt to manage the economy in a true
market economy.
Market Economy: What
to Produce?
• Consumers decide what to produce through
demand.
• If more consumers want and will buy some
good or service businesses will be attracted to
enter the market and fulfill consumer wants.
• If consumers lose interest in a good or service
the businesses providing these must find
another niche or go out of business.
Market Economy: How
to Produce?
• Producers must find efficient ways to produce
goods to keep costs low, therefore increasing profits
or permitting lower prices to compete with similar
businesses for consumers.
Market Economy: How
Much?
• Consumer demand decides how much or how
many of a particular good or service will be
produced.
• Excess product may be sold for a loss, but
companies that overestimate consumer demand
may go out of business.
Market Economy: Who
Gets?
• Consumers decide whether to buy a good or
service at a particular price.
• Those able and willing to purchase an available
item are free to do so.
The Price of
Petroleum
• Petroleum (the crude oil found in the earth) was
once seen as a nuisance. People digging water wells
cursed their luck when they found it.
• The invention of the automobile created a demand
for gasoline, which is refined from petroleum.
• The increased demand and naturally limited
supply greatly increased the price of petroleum.
Alabama Agriculture
• Alabama agriculture has always been important to
the economy of the state.
• Before the Civil War cotton was king in the South,
including Alabama. The demand for cotton was
fueled by the textile industry of the United
Kingdom and the northern United States.
• The boll weevil devastated the cotton fields and
forced Alabama to diversify into other crops.
Alabama Tourism
• Alabama has recently developed tourism.
• The natural beauty of the mountains and beaches
attract some tourists. Others come for the
historical sites or Southern cuisine (such as the
Alabama BBQ Trail).
• The Robert Trent Jones Golf Trail brings golfers
from snow-bound states for winter play.
Alabama Urban
Growth
• Alabama, long a mainly rural state, has seen urban
growth in the last century.
• The emergence of the steel industry in
Birmingham created many jobs. People moved
from rural areas to take these jobs, greatly
increasing the population of the city.
Alabama Urban
Growth
• The location of state government in Montgomery
created civil service jobs, attracting workers from
rural areas to the city.
• Mobile grew as a port city through trade on the
Gulf of Mexico and beyond.
• Dothan grew as a rail hub for regional agriculture.
Conclusion
• Traditional economies are almost a thing of the
past.
• Command economies promise equality but deliver
misery. They fail to bring equality as political
connections give some more than others. Such
economies depend on violence and coercion.
• Market economies permit some to grow rich and
others to fall into poverty. However, they at least
offer the possibility of gaining wealth.
Conclusion
• Economics may explain many historical events.
• Alabama’s economy has changed from one based
mainly on rural cotton farming to a more diverse
economy that is more urban and more industrial
and service oriented.