Chapter 2 Notes - Denton ISD

Chapter 2 Notes Section 1 Economic Systems

Three Types of Economies: Traditional, Command and Market

Traditional: Individuals make decisions based on w hat is habit and custom Incentive to w ork hard is only for honor and good of the society

Advantages: * Everyone know s their role, no question of WHAT to produce * Born into your trade, no Q of HOW either

Disadvantages: * Discourages new ideas and ingenuity * Lack of progress leads to low er standard of living.

Command: Individuals make decisions based on w hat the government or planner tells them.

Incentive to w ork hard: little or none, just have to do w hat is quota

Advantages: * Economy can change quickly, from heavy industry to military to farming... * Health and public services are free or little cost for everyone

Disadvantages: * Does not meet the w ants of consumers * No incentive to w ork hard or become educated or career development

* Large decision making bureaucracy takes a long time to get anything done b/c of a ll t he w ork e rs a nd re d t a pe .

Market: * Individuals make decisions based on their ow n best interest. * Consumer decisions act like votes that control the economy. * Incentive to w ork hard: invisible hand: profit: entrepreneurial opportunities

Advantages: * It can adjust to change over time. IE. Ga s guzzle rs of t he 7 0 's>ga s short a ge > Honda Civic * High degree of individual freedom. Can you start your ow n business in the other tw o economies? * Small degree of govt. interference

* Decentralized decision making: billions of individual economic decisions are made each day. * variety of goods and services * degree of consumer satisfaction

Disadvantages: * Does not provide basic needs for everyone * Does not provide enough services for the public from the private sector * High degree of uncertainty because of the possible changing markets

Chapter 2 Section 2 Seven Economic Goals of the U.S.

1. Economic Freedom: w e can choose

our jobs and that is very important to us.

2. Economic Efficiency: If resources are

w asted, less G& S can be produced> few er W& N can be satisfied. We w ant benefits gained to exceed costs

3. Economic Equity:

Your gender, age, race, religion, or disability cannot keep you from employment. Advertisements cannot be false and w e are prot e c t e d by suc h t hings a s "le m on la w s."

4. Economic Security:

Soc ia l Se c urit y benefits are based on earnings averaged

over most of a worker's lifetime. calculate your avg mo. earnings for the 35 years you earned the most. At 65 years of age, you receive your PIA - "primary insurance amount" The maximum benefit for 2007 for a person retiring at full retirement age (65 years and 10 months) is $2,116/month.

Workers Compensation, Medicare (65+)

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