EB - Basic Economics Lesson

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Basic Economics

Introduction

 

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Economic Systems How do countries organize economic activity? Fundamental Economic Concepts Pure Command Economies A system in which economic decisions about production and consumption are made by a central authority such as the government. Who decides? What? How? For whom? Central authority or government Advantages Mobility - gather resources quickly and on a large scale Basic goods provided - product goods that benefit society and ensure everyone has access to basic necessities Disadvantages Poor information - are unresponsive to consumer preferences Innovation Discouraged - decide what to produce, removing incentives Pure Market Economies A system in which economic decisions about production and price are made by producers and consumers, involving little government intervention Who decides? What? Consumers How? Producers For whom? Price Advantages Competition - keep costs of production and prices of goods and services low Variety - Encourage firms that differentiate their products to meet consumer wants Disadvantages Wealth Disparity-can lead to poverty for individuals who lack valued knowledge and skills Few Public Goods - do not produce as many goods that people can enjoy without paying for them Broad Social Economic Goals Averages for Top Five Command Economies How are they doing? Measuring performance on their top three goals Economic Equality = 64, the most recent Gini index number Economic Security = .631, 2013 human development index Economic Stability = 20.9%, 2013 inflation rate Averages for Top Five Market Economies How are they doing? Measuring performance on their top three goals Economic Growth = 2.8%, most recent real GDP growth rate Economic Efficiency = 1.9%, 2012 labor productivity growth rate Economic Freedom = -.26%, change in economic freedom index score, 2014-15 Economic Continuum Pure Command Economy = 0 to the Pure Market Economy = 100 North Korea = 1.3 Cuba = 29.6 Iran = 41.8 India = 54.6 Saudi Arabia = 62.1 United Kingdom = 75.8 Australia = 81.4 Hong Kong = 89.6 The Heritage Foundation's Index of Economic Freedom measures the performance of 186 countries in 10 areas of economic freedom on a scale of 1 to 100. Property rights Government spending Business freedom Monetary freedom Investment freedom Freedom from corruption Fiscal freedom Labor freedom Trade freedom Financial freedom  

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