Unit 1: Principles of Economics
Unit 1 is covered by chapters 1, 2, and 3 of the textbook we use.
Answering these three questions will help them decide what they will be doing. If they decide to make tennis balls by hiring people to put them together for adults, they will make different decisions then someone who decided to make potato chips with machines for teens and kids (even if they can use similar packaging).
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Equality is when everyone is gets or is given access to the same things. We all have equal access to working for one million dollars for example, but some of us might have an easier time doing so. If the government decided to give everyone the same brand of shoes, that would also be equal. But not all of us might need shoes or be able to wear the same brand, which brings us to...
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Equity is giving everyone what they need to be on a level playing field with others. For example, if you picture people who live different distances from school, it might be easier for some to get to school on time. If we give the closest person nothing since they don't need anything and the furthest person a bus pass, both get exactly what they need to make it to school at the same time.
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Traditional economies focus on completing tasks based on custom and ritual. These economies prefer to do things the way they always have. These economies tend to be seen when
These economies tend to be secure and predictable, as you know your role and know what to expect in the economy. However, these economies discourage innovation and provide low opportunities for growth, leading to them being generally poorer. |
Command economies are designed to have governments make the decisions. These economies are top-down and often need to have large bureaucracies to function.
Command economies, also known as centrally-planned economies, can be efficient as they react to changes quickly. They can also be used to promote equality or equity and you may have more security in a command economy as they tend to focus on getting people what they need. Command economies can also be inefficient, since large bureaucracies are slow to react. They also ignore innovation and you lose a lot of freedom when governments make decisions. |
Market economies have individuals making the decisions. Government takes a very hands-off approach in a market economy.
In a market economy, individuals have lots of freedoms and since you can acquire more wants there are a variety of goods and services. A market economy can also be efficient, since individuals can each react on their own to changes. On the other hand, market economies completely ignore equality and equity. Not everyone will be able to afford to satisfy their needs and wants and market economies don't help people to do so. This means there is little security as well. Furthermore, market economies have potential for big success but also big loss. |
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Most countries don't actually use a pure form of any of those economies, however. They all try to balance those values in different ways to maximize the values in ways they prefer. Many economies tend to be a mixture of different elements of each type. Mixed economies are put in place to promote the good qualities of as many values as possible. The USA is a mixed economy; it tends to prefer free market principles while ensuring there are some command elements to prevent disaster and provide safeguards for people.
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In all this, the US government plays a role as well. This is where the command elements present themselves.
Our government offers safety nets, public goods, and regulations. |
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Public goods are any goods that would be troublesome to exclude non-payers and burdensome for a private company to take on. Public sidewalks, for example, would be a challenge for a company to maintain and keep in working order. They would also have an expensive time hiring security and ticket collectors if they sought to exclude people who didn’t pay to use them. Public goods are set out by the government to benefit us. In return, we pay a little in taxes to cover their maintenance and costs.
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