ECON102-Lecture%203-Economic%20Systems

ECON102-Lecture%203-Economic%20Systems - Next time Quiz #1...

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Next time Quiz #1 On the material from the Lecture 2 notes 1
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The world’s variety of the economic systems Lecture 3 TODAY
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Recap from the previous lecture The economic principles: 1.Maximization 2.Substitution 3.Opportunity cost 4.Diminishing returns 5.Rate of time preference 3
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Recap from the previous lecture The central role of scarcity in the world  order and the science of Economics 4
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Today: Economic Systems So,  how do these economic principles  work together and explain people’s  behavior and economies as a whole? The economic principles work together in  any economic system : market, command,  or mixed (or other) Economic system serves to solve the  basic problem any society faces: the  scarcity problem 5
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Economic systems Any economic system solves the problem  of what, how, and for whom goods and  services are produced This is a scarcity problem  -> with scarce  resources, an economy needs to meet  thousands of demands, needs, and  desires of different urgencies 6
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Economic systems Any community must decide  what goods  and services to produce How to produce  these goods and  services, i.e. what resources to use, in  what quantities, and what way For whom  in society, and in what number,  the benefits should be provided  7
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Economic systems If it is millions of ordinary consumers and  producers  who decide what should be  produced, it is independent producers  decide on production methods, and it is  the market that aggregates these  individual decisions  ->  market economy If all major decisions about what, how, and  for whom to produce are made by central  authorities   ->  command economy 8
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Economic systems What values underpin an economic system? Priority of the needs of the state/ collective  good  ->  command economy Priority of the needs of individuals/  individual welfare  ->  market economy 9
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Economic principles and  systems 10
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Economic systems The developed countries are familiar with the  market system, aka capitalism   ->              We’ll discuss the market system first The  command economy  is usually associated  with the communist regimes  ->               We’ll discuss the command system  second Neither market economy nor command economy  exists in its pure form  -> mixed economies 11
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Markets  Just said: Markets  is one of the ways to solve the  scarcity problem: how to meet thousands  of demands with scarce resources Capitalism  is another name for market  economies 12
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Capitalism  It is an economic system in which individuals make voluntary private decisions  about  what to consume, produce, at what price, 
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ECON102-Lecture%203-Economic%20Systems - Next time Quiz #1...

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