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LESSON2

What?How?ForWhom?

1.FOCUS

StudentObjectives

•Defineaneconomicsystemasthewaypeopleorganizetheproductionand

distributionofgoodsandservices.

•Stateandexplainthreebasicquestionseveryeconomicsystemmustanswer:

Whattoproduce?Howtoproduce?Forwhomtoproduce?

Background

Aneconomicsystemisthewaysocietyorganizestheproductionandcon-

sumptionofgoodsandservices.Everyeconomicsystemanswersthreebasic

economicquestions:Whattoproduce?Howtoproduce?andForwhomto

produce?Howasocietyanswersthethreebasiceconomicquestionsdetermines

thesociety’seconomicsystem.

Historically,therearethreetypesofeconomicsystems—tradition,command,

andmarket(price)system.Theseeconomicsystemsanswerthebasiceconomic

questionsindifferentways.Inaneconomicsystembasedontradition,decisions

arebasedonpastbehavior.Inacommandeconomy,decisionsaboutproduction

andconsumptionaremadebyacentralplanningunit,suchasthegovernment.

Amarket(price)systemanswersthebasiceconomicquestionsinthemarket-

place.Amarketeconomyisaneconomicsystemwheremostgoodsandser-

vicesandresourcesareedthroughtransactionsbyhouseholdsandbusi-

nesses.Mosteconomiescontainsomefeaturesofallthreesystems,becausea

mixturebestsatisfiestheeconomicgoalsofasociety(suchaseconomicfreedom,

equity,andeconomicsecurity).

Concepts

Economicsystem,basiceconomicquestions

2.PREPARE

NewspapersStaplers

ScissorsRulers

Markers

1.Foreachgroupoffourorfivestudents,collectalargesupplyofnewspapers,

apairofscissors,amarker,stapler,andruler.

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