Economics Notes
Unit 2 – Econ Systems
Name:________________________
Block:___
Section 1 – Three Economic Questions
Economic System – The method used by society to ___________ and ___________ goods
and services.
Different economic systems have developed as responses to the problem of ___________.
1. ___________ goods/services should be produced?
a. ___________ determines its needs and wants.
b. Because of scarcity, each decision comes at an ____________________.
c. Examples: Everything from candy bars to national defense
2. ___________ should the goods/services be produced?
a. As ___________ as possible (inexpensive)
b. Requires understanding of the available “___________” (resources)
c. Examples: Public education systems, where manufacturing jobs are located,
etc.
3. ___________ consumes the goods/services?
a. Societies decide how to ___________ the available goods/services; this is
normally decided by the distribution of ___________ (factor payments in
economic terms).
b. This is one of the ___________ differences, if not the ___________
difference, between economic systems.
Quickwrite:
Should the good things in society be distributed evenly? (e.g. wealth, health care, quality
food, etc.) Explain.
Section 2 – Economic Goals/Values
1. Economic ___________ – Making the most of available resources.
2. Economic ___________ – The opportunity to make our own ___________;
Freedom from government _______________ regarding production and distribution
of goods and services.
Economics Notes
Unit 2 – Econ Systems
Name:________________________
Block:___
3. Economic ___________ and ___________ – ___________ that goods/services will
be available when society needs them; Knowing that help is available if needed (a
safety net). For example, welfare, unemployment, medicaid, etc.
4. Economic ___________ – The ____________________ of economic success
among society
n Equal pay for equal work (note that not all jobs are considered equal)
n In your opinion, should everyone receive the same pay? Why or why not?
5. Economic ___________ and ___________ – Growth must occur for a nation to
improve its ____________________.
n What happens if the population is growing, but a country’s economy is not?
6. Other goals – ___________ protection, full ___________, universal health care, etc.
Nations/societies must ___________ their goals.
Because of scarcity, achieving any economic goal comes only with some kind of
economic ___________.
Looking over the economic goals we have discussed, list them on your paper in the order
you think/feel they are most important. In one sentence each, explain why the first is the
most important to you and the last is least important to you.
Economics Notes
Unit 2 – Econ Systems
Name:________________________
Block:___
Section 3 – Economic Systems
•
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Traditional
Relies on ____________ or
____________
Revolves around the ____________/
____________
Little innovation
____________/resistant to change
Example(s): ____________
Market Economies
• Decisions made by ____________,
based on ____________,
____________, or ____________
• Also known as free ____________,
____________, or free market
Capitalism
• Examples: ____________
Command Economies
Mixed Economies
____________ decides the answers to
• ____________-based economic
the key questions
systems in which the ____________
plays a ____________ role.
Also known as ____________
• Examples: ____________
Planned Economies
Requires centralized ____________
Examples: ____________
1. Free Overview
a. A market is an ____________ that allows ____________ and ____________
to exchange things.
b. Markets exist because very few people or societies are __________________.
c. Because of ____________ – the concentration of the productive efforts of
people or companies on a ____________ number of activities. This improves
____________.
2. The Free Market Economy:
a. Based on ____________ exchanges in markets;
b. ____________ and ____________ use markets to exchange goods/services;
c. Individuals/businesses ____________ the factors of production (land-laborcapital), make what they want, and buy what they want;
d. Function best in a ____________ decision-making environment (such as the
U.S.)
e. Key players are ____________ and ____________
o Households – group of people in a residence that own some factors of
production and are the consumers;
o Firms (____________) – Make final goods/ services from the “inputs”
(factors of production)
Economics Notes
Unit 2 – Econ Systems
Name:________________________
Block:___
f. Firms ____________ factors of production (labor and raw materials) from
households to receive...
o ____________ – income received from a transaction before the costs
are removed;
o ____________ – the financial gains made in a transaction after costs
are removed.
g. ____________ market – area where the products/outputs are purchased.
h. ____________ market – area in which the factors of production are
____________ in order to make ____________ products.
In the space provided, draw a circular flow model:
i. ____________ Nature of the Marketplace:
1) ____________
• Buyers and sellers consider their own personal gain
• Self-interest is the ____________ force of the market
2) ____________
• Consumers look for the lowest prices (normally)
• Firms seek to make the greatest profits
• Both seek ____________ – the hope of reward or fear of
punishment that encourages people and firms to behave certain
ways.
Economics Notes
Unit 2 – Econ Systems
Name:________________________
Block:___
3) ________________
• Wrote ________________________________ (1776)
• Speculated on the roles of competition and self-interest, referring
to them as the __________________________.
• Favored _____________ government involvement
j. Summary of the Free Market:
1) Advantages:
• Economic _____________
• Economic _____________
• Economic _____________
• Consumer _____________ – consumers really decide what gets
produced.
2) Disadvantage: _____________ and _____________ are sometimes
difficult to achieve in the free market.
3. Centrally Planned / _____________ Economies:
a. _____________ private property, free market pricing, competition, and
consumer choice.
b. _____________ controls the factors of production – it owns both the land and
capital.
c. The gov’t controls/owns _____________ as well and decides how much
everyone is _____________.
d. Self-interest and competition are _____________.
e. There is no consumer _____________.
Socialism vs Communism
f. _____________ – a social and political philosophy that believes
_____________ means should be used to distribute wealth _____________.
1) Believes economic _____________ is only possible if the
_____________ (a.k.a. _____________) controls economic power.
2) Government owns _____________ industries, but not all.
g. _____________ – arose out of socialism – except ______ economic power
rests with the government.
1) Believes that it can only be achieved through _____________.
2) Accomplished with _____________ government
3) Strict _____________ from citizens
Economics Notes
Unit 2 – Econ Systems
Name:________________________
Block:___
h. _____________ of Centrally Planned Economies:
1) Can be useful to _____________ industries, but usually bad in the
long run (e.g. – The U.S. space program, the New Deal, etc)
2) Performance usually _____________ meet expectations and
_____________ satisfy needs.
3) Large gov’t is _____________ and _____________.
Section 4 – Modern Economies (Most)
1. There is ____ economy in the world today that is _____________ a command
system or free market system. Instead, societies are using a _____________ of
market and command economy traits.
2. Limits of ___________________ (the idea that government should _____________
in the marketplace or economy).
3. Reasons for government _____________:
a. Providing for specific needs of a society like national _____________,
_____________, or _____________.
b. _____________ private property
c. _____________ contracts/obligations
4. Balancing _____________ and _____________:
a. A society must _____________ its values and _____________ its economic
goals.
b. It must also _____________ the opportunity _____________ of pursuing
each goal.
5. Societies’ variation on _____________ economies is measured by their level of
government _____________ and _____________ (private or corporate ownership of
capital goods).
6. _____________ Flow Model of a Mixed Economy:
a. Government in the Factor Market – it _____________ land, labor, and capital
from households.
b. Government in the Product Market – it _____________ goods and services
from businesses.
c. Government also works in the _____________ of money – government
collects _____________ from households and business (and spends it).