Unit Two

Economic Systems

From far away, a galaxy looks like a big, solid white blob.

However, when you get close up, you see that in fact a galaxy is a

conglomeration of billions of individual points of light.

We always refer to an economy as if it were one big thing.

However, like a galaxy, an economy is really a conglomeration

of millions of individual markets.

I. A market is any place or situation where there is a voluntary

exchange of goods or services.Markets can take many forms!

A. In order for a market driven economy to work, there are certain vital aspects, or pillars, which must

be present.

The Nun Bun: How get it back?

1. Incentives and profit motive: without them, absolutely nothing gets done.More examples?

Cash for Clunkers=$5000 for old cars! Grades! Kroger Mastercard!

2. Private property: If it’s ours, we work harder and smarter, like Jeff

Ellis!

3. Price system: Prices determined by supply and demand, not the government.

How much is something worth?

Only as much as someone is willing to pay!

$550,000!

4. Competition: Who benefits and how?

Honda Element

Scion xB

Kia Soul

Chevy Box

Competition leads to lower prices, better quality, and innovation!

The Justice Department filed suit Wednesday to block AT&T's $39 billion deal to buy T-Mobile

USA

…on grounds that it would raise prices for consumers.

-The Tennessean, 8/31/11

Competition is so important that it is protected by law. Monopolies are

forbidden by anti-trust laws.

Evil Standard Oil Trust

Standard Oil was broken into these.

5. Entrepreneurial freedom! Conditions must be conducive for entrepreneurs to do their thing so they can give us…

Obama action figure! Skittles! Etc.

Low taxes, access to bankruptcy protection, less government regulation help

entrepreneurs.

View clip from Food, Inc. What final pillar is illustrated by this

clip?

One never knows what consumers will embrace.

Embrace indeed…

If we do buy it…

…imitators arise!

If we don’t buy it, it disappears.

6. Consumer sovereignty: the consumer is king/queen of the

economy!

Choose three of the market pillars, and then explain how each causes pizza to

get to your house faster than an ambulance.