Name: Victor Vasquez Block 2

Ch 2 Economic Systems (pp. 22-46) Guided Reading

Section 1

1. What are the 3 questions that every society must answer?

What goods and services should be produced ?
How should these goods and services be produced ?
Who consumes these goods and services ?

2. How do a traditional economy, a market economy, a

command economy, and a mixed economy differ? In the
traditional economy it relies on habit, custom, or ritual to decide what to produce
and how to. In a market economy, economic decisions are made by individuals and
are based on exchange, or trade. Command economies the central government
alone decides how to answer all three key questions. Finally in a mixed economy it
is marked based on economic systems in which the government has a limited role.
3. Why aren’t all people paid the same amount in factor
payments for the resources they provide?
People aren't paid the same amount in factor payments because
different resources have different values.

Give your own example of 2 unequal factor payments.

A teacher making less than a doctor.
A fireman but funded less than police.

4. Rank the 6 economic goals in your opinion with #1 being most

important, and #6 being the least. Justify the reasoning in your
rankings.
1 economic freedom because you get to do your own thing. 2
Growth and innovation because your company is becoming
bigger. 3 security and predictability 4. efficiency 5. equity
5. Using the chart below, list the societal values of each of the
four economic systems described in the section.
 Traditional Command Market Mixed

Soci factories principals market is the US is a

et al that make in school things mixed
values like make the such as a economy
frozen foods rules and grocery because it
by the store when leave
producing students people pay ownership
the product would have to get their to private
and and to follow groceries hands and
where and the rules gives
when they agriculture
distribute to other
these companies
products / people

6. You and your friends decide to earn money by washing cars.

How are the 3 economic questions answered in this market? how
should we produce it? Who will get the output? How will the
system promote progress?
7. Using a smart device, find a company (don’t copy your
neighbor’s) that has a mission statement that attempts to answer
the 3 economic questions. Write down the complete mission
statement and circle where the 3 questions are answered.
Zips- Make a difference in the lives of our customers and team
members by providing a SAFE, FAST, FRIENDLY, wash
experience along with a progressive work environment through
STRUCTURE, STRONG, FOCUSED LEADERSHIP. Section 2

8. How does specialization make a market economy more

efficient?
The more they focus on one task, the more efficient they become at this task, which
means that less time and less money is involved in producing goods.

9. What is the difference between the factor market and the

product market?
The product market is where goods and services are sold and bought, while the factor
market is where different factors of production like land, capital, labor are bought and
sold.

10. How do we as consumers in a free market benefit from

competition?
Competition makes it easier to get higher quality products for
cheaper prices because everyone is trying to have the best deal.

11. Explain what Adam Smith meant by “the invisible hand of the
marketplace”?
The invisible hand guides a nation’s resources to their most
productive use.
12. Why do you think it is difficult to achieve economic equity in
a true free market economy?
People have different types of skills and different levels of ambition. In a free market
economy, this means that people will not be able to get the same amount of wealth.
Section 3

13. What is the difference between socialism and communism

(don’t just copy definitions)?
Unlike socialists, communists believed that a socialist society can
only come about after a violent revolution.
14. What are the characteristics of an authoritarian government?
strict, obedient, no freedom, has a dictator.

15. Why did Soviet collectives offer little incentive to farmers?

They offer little incentive because they were a communist government that regulated
the production of crops; farmers could only produce what they were told to produce.

16. What was the opportunity cost of the emphasis on heavy

industry in the Soviet Union?
Opportunity cost of the USSR focus on heavy industry were
consumer goods and products. Heavy industry needed big
investments, especially steel, chemicals, machinery, etc.

17. After watching the news story on North Korea, give 4

examples of how its economy is centrally planned. _____In a
command economy, the economy is centrally planned and
coordinated by the government. The government of North Korea
determines what goods should be produced, how much should
be produced, and the price at which the goods are offered for
sale.

18. Why do centrally planned economies have difficulty meeting

consumer needs?
________________It eliminates competition, giving
businesses no incentive to produce consumer goods of high
quality.

19. Rank on a scale of 1-10 how difficult the following economic

goals are to achieve in a centrally planned economy.
a. economic efficiency b. c. economic equity d.
economic security and economic growth and
predictability innovation

_1._economic efficiency --3

2._economic growth and innovation --5
3._economic equity --7
4.economic security and
predictability--9
Justify your lowest and highest score and be prepared to discuss/defend
in class.

Section 4

20. What is laissez faire? _____The concept of laissez-faire in

economics is a staple of free-market capitalism. The theory
suggests that an economy is strongest when the government stays
out of the economy entirely, letting market forces behave
naturally._______________________________________
______________________________________________
______________________________________________
______________________________________________
______________________________________________
________________________________________ Do you
think there is too much of this concept in our economy or not
enough? Why or why not? ________ Laissez faire alone is not
enough to guide an economy, but with a proper balance between
the power given to the government and freedom of market
forces, economies can flourish with minimized
risks.

21. Why have some nations begun a transition to free enterprise?

______Some nations have begun a transition to free enterprise
because the individuals or people of those nations need control
over what is going on in their marketplace. They do not want
their government's interventions to choose for
them.__________________________________________
_____________________________________________
_
_____________________________________________
_
_____________________________________________
_
_____________________________________________
_ ____________________________________

22. Why are nations with centrally planned economies

sometimes slow to succeed when they privatize industry? Most
centrally planned economic governments have not achieved the highest
standard of living, which makes it difficult for one privatized industry to
compete with the government.
23. Using a smart device, identify 4 agencies or organizations in
the US government that play a direct role in the nation’s
economy. Write down each agency’s name and purpose.
Department of agricultural- It provides useful information about
agriculture
Department of education- provides free education
Department of Energy - It creates *out of the box
transformational energy research
Department of health & human services- Promotes, works and
Protects the safety of eating foods, drugs etc.

24. Describe 3 ways your life would change if the US began using
a pure free market system.
1. Our way of earning and paying would change .
2. Us programs like free lunches won't exist. kids like me
won't be able to get food
3. the class/ nobility would be more apparent
Now describe 3 ways your life would change if the US had a pure
centrally planned economy.
1. Lack of competition and innovation
2. the government decides on what product/ services are
produce
3. more expensive products