AS Economics Aim Understand economic objectives and economic systems Objectives Define different agents objectives in an economy Describe how these objective are competing Analyse different types of economic systems ID: 620792
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Slide1
Economic Objectives and Economic Systems
AS EconomicsSlide2
Aim
Understand economic objectives and economic systems.
ObjectivesDefine different agents’ objectives in an economy.Describe how these objective are competing.Analyse different types of economic systems.
Aims and ObjectivesSlide3
Economic ObjectivesSlide4Slide5
A new high speed train line is planned to be built from Leeds to London.
It would mean the creation of a new line and state of the art station which would include a new shopping centre. However it would result in the demolition of the villages of Barton Le Clay and
Toddington
.
New High Speed Train Line
In groups of economic agents, form an argument considering your objectives, as to whether or not this should go ahead.
Consider residents of the areas opinions.Slide6
Economic agents often have different, conflicting opinions and objectives.
Decisions about the allocation of resources will need to take into account these objectives and conflicts.
Whether the government intervenes to allocate resources depends on the economic system.
Conflicts Between AgentsSlide7
Berlin Wall
1989 Signalled the end of CommunismSlide8
Resources are allocated by the command mechanism (i.e. the government).
All decisions about what and how much and who should produce goods/services are taken by government.
Only exist in a dictatorship government.
Consumers had to queue to buy goods, whose prices were fixed by governments, resulting in shortages and poor quality goods.
Command economies broke down.
Still exist: China, North Korea, Cuba.
Command/Planned EconomySlide9
Resources are allocated by the price mechanism and market forces.
Allocates scarce resources among competing uses.
Market could be anything from a street market, to buying goods and services online, to markets such as eBay!One example would be labour, exchanged for cash, as different prices.
Market EconomySlide10
Prices and Profits
Prices and Profits in Free Market Economy
Scarce resources achieve high prices. E.g. Diamonds
Prices and profits have three key functions:
Incentive function
Rationing function
Signalling functionSlide11
Prices and Profits
Prices and Profits in Free Market Economy
When prices rise:
Consumers tend to
ration
their demand.
Sends a
signal
to producers that there is a scarcity or shortage.
Creates an
incentive for suppliers to increase supply as more profit is potentially available.Slide12
Prices and Profits
Prices and Profits in Free Market Economy
When prices fall:
Consumers increase their demand, end to rationing.
A signal is sent to producers that there is too much supply and scarcity falls.
Creates an
incentive
for producers who see profits falling to leave the market.Slide13
As oil prices increase, motorists would spend more money on petrol and be tempted to ration the amount of journeys, cutting demand for petrol.
Oil companies are incentivised to increase supply by developing oil fields.
High market price has signalled new firms should enter the markets.
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US('90)/bblSlide14
Cuban Economy, changing for the better?Slide15
What were the problems being experienced in Cuba’s command economy?
Why might small changes be happening to Cuba’s economy?
What may be the benefits and drawbacks of Cuba changing from a command to a market economy?
Talking Points