Section 2 Evaluating Economics Performance
Section 3 American Free Enterprise
Chapter Overviews
Section 1: Economic Systems
Economic systems help societies provide for the wants and needs of their people. Three major economic systems have evolved over the years: traditional, command, and market economies. In the traditional economy, the WHAT, HOW, and FOR WHOM questions are answered by tradition, customs, and even habits handed down from generation to generation. In a command economy, a central authority answers the three basic questions. In a market economy, decision making is decentralized with consumers and entrepreneurs playing a central role. Most economies in the world today feature some mix of traditional, command, and market economies.
Why It Matters, p. 32
The BIG Idea
Guide to Reading, p. 33
Section Preview
Content Vocabulary
economic system
traditional economy
command economy
market economy
market
capitalism
mixed economy
socialism
communism
Academic Vocabulary
stagnation
allocate
emphasizing
Reading Strategy
Comparing and Contrasting
Companies in the News
McDonald's and Hindu Culture
Traditional Economies, p. 34
Characteristics
Examples
Advantages
Disadvantages
Reading Check
Describing
What are the advantages an disadvantages of a traditional economy?
The Global Economy & You, p. 35
Command Economies
Characteristics
Examples, p. 36
Advantages
Disadvantages, p. 37
Reading Check
Market Economies
Characteristics
Examples, p. 38
Advantages
Disadvantages, p. 39
Reading Check
Identifying
What are the main characteristics of a market economy?
Mixed Economies
Characteristics
Examples, p. 40
Advantages
Disadvantages, p. 41
Reading Check
Explaining
How can you explain the range of mixed economies in the world?
Section 1 Review
Case Study
The Home Depot
Section 2: Evaluating Economic Performance
The seven major economic and social goals used to evaluate the performance of an economic system are economic freedom, economic efficiency, economic equity, economic security, full employment, price stability, and economic growth. If the system does not perform as people would like, people can lobby for laws to achieve their goals. One example would be the Social Security program that was enacted to achieve the goal of economic security.
Section 3: American Free Enterprise
Free enterprise, another term used to describe the American economy, refers to the competition that is allowed to flourish with a minimum of government interference. A capitalistic free enterprise economy has five important characteristics: economic freedom, voluntary exchange, private property rights, the profit motive, and competition. Another key component is the entrepreneur, who is the risk-taking individual in the economy that starts new businesses and undertakes new ways of doing things in search of profits. The consumer is sometimes thought of as being "king" or sovereign of the market, and government is involved in the economy primarily because people want it to be involved. Because of the government involvement as the protector, provider, regulator, and consumer, the American economy can also be described as a mixed economy, or a modified free enterprise economy.
