What is this picture saying about the differences between North and South Korea?

Command vs. Market Economies, 1/25WARM UP

• What is this picture saying about the differences between North and South Korea?

What are command and market economies?

• Command /centrally planned economies…

• Market economies…

North Korea and South Korea• Korea was a unified

country until the end of WW2

• After the split, North Korea became a communist country with a command economy

• South Korea became a democratic republic with a market economy

South Korean Industries

North and South KoreaNorth Korea South Korea

GDP: $40 billion $1.268 trillion

GDP per capita: $1.800 $31,220

Rank in Global Economy: 125 Rank in Global Economy: 15

North Korea Economy Explained

South Korea Economy Explained

HOW THE WORLD SEES NORTH KOREA

Send a letter across the DMZ

• Write a letter to your Korean counterpart about daily life in your country.

• Include– Your job, overall happiness, your view of the

government– Questions about your neighbor’s country

Market Economies, 1/29Warm Up

• Trace the story of the $5 bill from beginning to end in this situation:

– Where did that $5 bill come from?

– Where will it go?– And after that?– And after that?

• (Don’t copy Q, simply answer it in a complete sentence)

In your notebooks…COMMAND ECONOMIES MARKET ECONOMIES

– Centrally planned economy

Command Economies

Command Economies – Government determines

what, how and for whom things will be produced

Command Economies

• Who is Karl Marx and what did he have to do with Socialism and Communism?

Command Economies Today

• No pure command economies today– modern

telecommunications bringing about change

Command Economies• Disadvantages– central planners

do not understand local conditions

– inefficient– Shortages– Few choices

Market Economies

• FEATURE 1– Private property

rights protected by law

– Relationship between buyers and sellers organized in markets

Market Economies• FEATURE 2: – Laissez faire– Capitalism– Producers create

goods according to demand

– some government involvement

Market Economies

• FEATURE 3: Voluntary Exchange in Markets– Voluntary exchange– Profit

Market Economies• FEATURE 4: – Competition– According to Consumer

sovereignty who controls what is produced?

– Competition checks producers and buyers

Market Economies

• FEATURE 5: Specialization How does specialization benefit consumers?

Market Economies• Advantages– Individuals free to make

economic choices– Political Freedom– Profit rewards hard work

Market Economies

• Disadvantages– Does not give

security to sick or aged

– Businesses did not address problems caused by industrialization

Hand over your paycheck punk!

Mixed Economy• A combination of pure

and centrally planned economy

• The US is a mixed economy– Government only

steps in when needed but is mostly hands off

– OSHA, federal minimum wage, zoning

That’s why America is freaking

awesome.

Market Economies

• KEY CONCEPTS– Circular flow model illustrates how interactions

occur in a market – SEE PAGE 53

Circular Flow Model(this is just an economist’s fancy way of showing you that you earn money, spend money, and it’s all just a circle of life)

Product Market

Firms

Factor Market

Households

Circular Flow Model Homework Assignment

• Create a Circular Flow Model using your own example of economic activity (i.e. buying a new iPad)

• Must be colored• Must be neat• Worth 20 points• DUE TOMORROW