Economic systems and fruit

WHAT WILL WE LEARN TODAY? Identify various economic systems

We will gain understanding of the advantages and disadvantages of various systems

To be able to analyse reasons to trade internationally

Also try to work out what the various fruit represents?????

CLASS STRUCTURE FOR THE LESSON

1 – Market economies2 – International trade

1 - Assess the benefits of market and mixed

market economies

2 – Determine the pros and cons of conducting

business internationally

3 – Analyse the factors that may make entering an international market

difficult

Plenary

MIXED MARKET AND MARKET ECONOMIES

What the bean is this?

Ok we’ll come back to this later

WHAT IS AN ECONOMIC SYSTEM? Market economic system

Planned economic system

Mixed economic system

MARKET ECONOMY

Decisions regarding investment, production and distribution are based on supply and demand factors.

Market economies can range from hypothetical free market to regulated markets and interventionist variants.

Most existing market economies include a degree of economic planning or government direction and are classified as mixed economies.

In the real world, market economies do not exist in pure form

ADVANTAGES OF A FREE MARKET ECONOMY A variety of goods and services available Businesses respond quickly Businesses will innovate There is no taxation

DISADVANTAGES OF A FREE MARKET ECONOMY Businesses will only produce goods and services

that earn a high profit Businesses will only sell products to consumers

who can afford to pay most for them Resources will only be employed if it is profitable

to do so (no NHS etc...) Harmful goods may be produced if it is profitable

to do so Some producers and consumers may ignore the

harmful effects of their decisions on others and the environment

Some firms may dominate the market supply of a particular product (monopolies)

PLANNED ECONOMY Decisions regarding production and

investment are planned by central government and is normally centralised.

The goal of central planning is to allow government to take advantage of shared information and make informed decisions regarding investment and the allocation of economic resources.

The extreme is when government plan all areas of the economy and this is called a controlled system economy

MIXED ECONOMY

THE MIXED ECONOMY

Somewhere in-between the 2 extremes The government can: Provide services such as education Provide services such as street lighting Employ people who would otherwise be

unemployed Provide financial help to important

businesses Introduce laws to protect the consumer and

the environment Regulate or break-up monopolies

PROBLEMS CREATED BY GOVERNMENT POLICY Disposable income is reduced due to taxation Increased costs to business of regulation Public sector organisations are often

inefficient

MY WEEK

Don’t worry Matt I’ll sort the taxes

Oh Pat you are my hero, I wish I

was more like you

THE TRUTH

INTERNATIONAL TRADE

CONSUMER CHOICE AND OPPORTUNITIES FOR GROWTH Consumer choice Increased competition Business growth Free trade (workforces and technologies

anywhere in the world)

ADVANTAGES OF INTERNATIONAL TRADE Specialisation Consumers benefit from imported goods

otherwise not available to them Competition Economies of scale Best workforces

DISADVANTAGES OF INTERNATIONAL TRADE Competition Movement to less well

developed economies Global demand may be dominated

by certain developed/developing economies Social cost of transport pollution Loss of culture, uniqueness

BARRIERS TO FREE TRADE

Tariffs Quotas Embargos

EMBARGOS

Sometimes called Boycotting i.e. To boycott another country

ARGUMENTS FOR TRADE BARRIERS They help protect small businesses and new

industries They prevent dumping They prevent over-specialisation by

protecting a range of different industries

ARGUMENTS AGAINST TRADE BARRIERS They restrict consumer choice and

opportunities for new businesses and business growth

They protect inefficient domestic businesses with higher costs and often lower-quality products

Other countries will retaliate by introducing their own trade barriers

PROBLEMS ENTERING NEW MARKETS ABROAD

ENTERING OVERSEAS MARKETS There may be language barriers Different cultures, customs and tastes will

need to be understood The business must comply with different

laws, regulations and taxes The business must manage exchange rate

risks There are increased risks of non-payment

OVERCOMING PROBLEMS ENTERING OVERSEAS MARKETS

A business can use local contacts

A business can set up assembly or sales only business units overseas

It can enter into a joint venture with an overseas business

A business can merge with or takeover an existing business

SO WHAT WAS THE FRUIT? It symbolised market structures

Free market, all apples grow ungoverned and the biggest and quickest fall first and succeed in planting their seed

Planned economy – government tell you what to grown and where it goes

Mixed economy – Somewhere in-between, plus its a cool image

World trade and choice

MIXED MARKET AND MARKET ECONOMIES

What the fruit is this about now? take an educated guess!

WHAT DID WILL WE LEARN TODAY? Identify various economic systems

Understanding of the advantages and disadvantages of various systems

Reasons to trade internationally

Some gibberish about fruit

BUSINESS ACTIVITY 1 – Market economies

2 – Internation

al trade

1 - Assess the

benefits of market

and mixed economies

2 – Determine the pros and cons

of conducting business

internationally

3 – Analyse

the factors that will make

entering international market s difficult

Plenary