EMS
, CHAPTER 1: ECONOMIC SYSTEMS
WHAT IS AN ECONOMIC SYSTEM?
-the system used by the government of a country to solve the country's economic
problem
WHAT IS THE ECONOMIC PROBLEM?
-People have unlimited needs and desires but limited resources to satisfy these
desires and needs.
A COUNTRY'S ECONOMIC SYSTEM DETERMINES THE FOLLOWING:
-how resources are allocated - PUBLIC AND PRIVATE BUSINESSES
-what goods and services are produced -WHO OWNS OWN PROPERTY
-how goods and services are produced. - WHO IS IN CONTROL OF COUNTRY
MARKETS ???
CENTRALLY PLANNED ECONOMY
( GOVERNMENT CONTROL ECONOMY)
BUSINESSES → STATE
Characteristics of centrally planned economy:
STATE → GET PROFIT &
➢ Government controls the factors of production (STATE)
PROVIDE SERVICES
➢ Government decides which goods and services are produced
➢ Government decides how these goods and services are produced
➢ Government decides who the consumers of these goods and services will be.
Centrally planned economy's benefits in everyday life:
➢ Reduce inequality
➢ EmploymentqSTABLE ECONOMY
➢ Economic equality
➢ Resources are used for the mutual benefit of all
➢ Economically vulnerable people are protected.
2 © Noted Summaries Grade 9 EMS Part 1: Management Studies www.notedsummaries.co.za
,Disadvantages of a centrally planned economy::
➢ The government can not process all relevant information vining enough to
make economic decisions - ENTREPRENEURS ARE DISCOURAGED
➢ Absence of profit motive. - GOVERNMENT CONTROLS EVERYTHING
- RESOURCES ARE NOT SHARED EQUALLY
MARKET ECONOMY
(ECONOMIC DECISION MAKED BY INDIVIDUALS)
- an economic system in which economic decisions are made by private individuals
who own the factors of production
GOVERNMENT → NOT ACTIVELY INVOLVED
Characteristics of market economy: GOVERNMENT → GOODS AND SERVICES
➢ Private individuals own and control the factors of production
➢ Entrepreneurs decide what to produce
➢ Entrepreneurs decide how the production will take place
➢ Individuals decide which goods and services will be used.
Benefits of market economy:
=Supporters of the free market economy believe that a free market system can
lead to a good way of allocating resources in an efficient way and that it gives
private individuals a good motivation of profit motive and entrepreneurship is
encouraged - ENTREPRENEURSHIP IS ENCOURAGED AND
REWARDED
- CAN DETERMINE YOUR OWN STANDARD OF
Disadvantages of the market economy: LIVING
➢ Economic inequality - LITTLE INTERVENTION OF GOVERNMENT
➢ Self-interest - INDIVIDUALS HAVE FREEDOM OF CHOICE
➢ Exploitation
➢ Often public goods and services are not provided or are scarcely provided.
-BIG DIFFERENCE BETWEEN RICH AND POOR PEOPLE (INCOME)
3 © Noted Summaries Grade 9 EMS Part 1: Management Studies www.notedsummaries.co.za
, Mixed economy
mixture of private and state control over the economy.
Characteristics of the mixed economy:
➢ Capital from banks, stock exchanges and government [spend tax revenue]
➢ Entrepreneurs decide WHAT to produce
➢ Government spends money on public services
➢ Government implements legislation to control economic activity [e.g.
Affirmative action in SA]
Benefits of mixed economy:
➢ Combination of state and private enterprises gives good economic growth
➢ Government works to promote balanced growth of the economy [income equal
to market economy]
➢ Private businesses are encouraged to contribute to the well-being of citizens
➢ Competition is promoted [but also protects citizens]
Disadvantages of mixed economy:
➢ Limiting economic growth
➢ Major GOVERNMENT INVOLVEMENT in the economy [government
bureaucratic and susceptible to corruption]
GLOBALIZATION:
-the trend towards greater economic integration and cooperation between
different countries.
GLOBAL ECONOMY INCLUDE:
(ECONOMY OF THE WORLD) GLOBALIZATION OF PRODUCTION
MARKETS, FINANCE, COMMUNICATION
Characteristics of global economy:
AND THE LABOR FORCES
➢ Free trade in goods and services
➢ Free movement of labor
➢ Free movement of capital.
4 © Noted Summaries Grade 9 EMS Part 1: Management Studies www.notedsummaries.co.za
, CHAPTER 1: ECONOMIC SYSTEMS
WHAT IS AN ECONOMIC SYSTEM?
-the system used by the government of a country to solve the country's economic
problem
WHAT IS THE ECONOMIC PROBLEM?
-People have unlimited needs and desires but limited resources to satisfy these
desires and needs.
A COUNTRY'S ECONOMIC SYSTEM DETERMINES THE FOLLOWING:
-how resources are allocated - PUBLIC AND PRIVATE BUSINESSES
-what goods and services are produced -WHO OWNS OWN PROPERTY
-how goods and services are produced. - WHO IS IN CONTROL OF COUNTRY
MARKETS ???
CENTRALLY PLANNED ECONOMY
( GOVERNMENT CONTROL ECONOMY)
BUSINESSES → STATE
Characteristics of centrally planned economy:
STATE → GET PROFIT &
➢ Government controls the factors of production (STATE)
PROVIDE SERVICES
➢ Government decides which goods and services are produced
➢ Government decides how these goods and services are produced
➢ Government decides who the consumers of these goods and services will be.
Centrally planned economy's benefits in everyday life:
➢ Reduce inequality
➢ EmploymentqSTABLE ECONOMY
➢ Economic equality
➢ Resources are used for the mutual benefit of all
➢ Economically vulnerable people are protected.
2 © Noted Summaries Grade 9 EMS Part 1: Management Studies www.notedsummaries.co.za
,Disadvantages of a centrally planned economy::
➢ The government can not process all relevant information vining enough to
make economic decisions - ENTREPRENEURS ARE DISCOURAGED
➢ Absence of profit motive. - GOVERNMENT CONTROLS EVERYTHING
- RESOURCES ARE NOT SHARED EQUALLY
MARKET ECONOMY
(ECONOMIC DECISION MAKED BY INDIVIDUALS)
- an economic system in which economic decisions are made by private individuals
who own the factors of production
GOVERNMENT → NOT ACTIVELY INVOLVED
Characteristics of market economy: GOVERNMENT → GOODS AND SERVICES
➢ Private individuals own and control the factors of production
➢ Entrepreneurs decide what to produce
➢ Entrepreneurs decide how the production will take place
➢ Individuals decide which goods and services will be used.
Benefits of market economy:
=Supporters of the free market economy believe that a free market system can
lead to a good way of allocating resources in an efficient way and that it gives
private individuals a good motivation of profit motive and entrepreneurship is
encouraged - ENTREPRENEURSHIP IS ENCOURAGED AND
REWARDED
- CAN DETERMINE YOUR OWN STANDARD OF
Disadvantages of the market economy: LIVING
➢ Economic inequality - LITTLE INTERVENTION OF GOVERNMENT
➢ Self-interest - INDIVIDUALS HAVE FREEDOM OF CHOICE
➢ Exploitation
➢ Often public goods and services are not provided or are scarcely provided.
-BIG DIFFERENCE BETWEEN RICH AND POOR PEOPLE (INCOME)
3 © Noted Summaries Grade 9 EMS Part 1: Management Studies www.notedsummaries.co.za
, Mixed economy
mixture of private and state control over the economy.
Characteristics of the mixed economy:
➢ Capital from banks, stock exchanges and government [spend tax revenue]
➢ Entrepreneurs decide WHAT to produce
➢ Government spends money on public services
➢ Government implements legislation to control economic activity [e.g.
Affirmative action in SA]
Benefits of mixed economy:
➢ Combination of state and private enterprises gives good economic growth
➢ Government works to promote balanced growth of the economy [income equal
to market economy]
➢ Private businesses are encouraged to contribute to the well-being of citizens
➢ Competition is promoted [but also protects citizens]
Disadvantages of mixed economy:
➢ Limiting economic growth
➢ Major GOVERNMENT INVOLVEMENT in the economy [government
bureaucratic and susceptible to corruption]
GLOBALIZATION:
-the trend towards greater economic integration and cooperation between
different countries.
GLOBAL ECONOMY INCLUDE:
(ECONOMY OF THE WORLD) GLOBALIZATION OF PRODUCTION
MARKETS, FINANCE, COMMUNICATION
Characteristics of global economy:
AND THE LABOR FORCES
➢ Free trade in goods and services
➢ Free movement of labor
➢ Free movement of capital.
4 © Noted Summaries Grade 9 EMS Part 1: Management Studies www.notedsummaries.co.za
