Understanding Economic Systems

• Economics looks at the production, distribution, and consumption of goods and services.
• An economic system shows how a country organizes its economy.

Three Categories of Economic Systems

• Planned economy: government makes all economic decisions

• Market economy: individuals make all economic decisions in the marketplace

• Mixed economy: a combination of individual and government economic decisions

• Scarcity exists because limited resources are available to satisfy humans' unlimited wants.

Resource Categories

• Land: natural resources

• Labor: human effort to complete work

• Capital: investment to build production capacity and the tools or machines to do work

• Economics helps decide what to produce, how to produce it, and who gets what is produced

Market Economic Principles

• Supply and demand relate to products and money exchange rules in a market economy.
• Consumers are individuals or businesses that purchase goods and services and generate demand for products.
• Producers are individuals/businesses creating goods and services and generate the supply of products.
• Equilibrium is when the market is balanced.
• Supply equals demand at a fair price for producers and consumers during equilibrium.

Changes to Equilibrium

• When the price of products increases, demand decreases, and supply increases.
• Higher prices lead producers to lower prices, resulting in increased demand and decreased product supply.
• Producers then raise their prices again when supply decreases.
• Cycles continue until a new equilibrium is found.
• A new equilibrium is when supply equals demand, and producers and consumers have a fair price.

Competition

• Competition exists between producers for consumers’ money and between consumers for producers’ products.
• Factors impacting competition: price, quality, warranties, good service, comfortable environment, product selection, brand equity, and reward programs.
• Hyundai and BMW are competitors.
• Hyundai has competitive advantages: lower price, inexpensive servicing, readily available products, hybrid/electric vehicles for a reasonable price, and good styling.
• BMW has competitive advantages: prestigious brand, high-quality vehicle components, long-lasting vehicles, more features, faster vehicles, premier styling, and gas/electric options.
• A producer or store goes out of business if they cannot compete and cannot make a profit in a market economy.

Market Economy Terms

• Monopoly: one producer controls almost all of the market for a product
• Consumers are negatively impacted by monopolies due to the lack of competition, which leads to higher prices.
• Oligopoly: a few producers control almost all of the market for a product
• An example of an oligopoly is Canadian phone companies, which causes upward pressure on prices that consumers pay.

Government Involvement

• Canada has a mixed economy.
• One example of government involvement is a crown corporation.

Other Examples of Government Involvement

• The Arts: government funding to artists, CANCON rules, and Telefilm Canada also support Canadian filmmakers
• Supporting Other Businesses: operating grants, tax breaks, and loans
• Environmental Initiatives: recycling and carbon taxes
• Labeling Regulations: ingredient lists and nutrition information
• Preventing Price Fixing
• Providing Services for the Public Good - social programs

Positives of Government Involvement

• Limit monopoly power
• Keep businesses open in Canada
• Allow artists to produce art
• Promote Canadian culture
• Keep Canadians safe
• Reduce waste and pollution
• Protect nature

Negatives of Government Involvement

• Higher taxes
• Red tape
• Extra expenses for businesses
• Promotes people that don’t actually like the business
• Reduces efficiency

Labour Force and Unemployment

• Labour Force: total number of people in an economy who can work
• Unemployment Rate: percentage of the labour force that does not currently have a job
• The unemployed want a job, but mostly because of economic factors and recession.

Unions and Economics

• Union: workers organized to negotiate as a group with their employer

• Unions are on the left side of the economic spectrum.

• Collective bargaining: negotiating together as a group

• Another name for a planned economy is collectivism

• Strike: stopping work as a whole union

• Reasons to strike: better wages, better working conditions, benefits, less hours of work

• Strikes pressure the employer to give concessions to workers.

Positives of Unions

• Protect workers’ rights and jobs
• Higher wages/more benefits
• Fewer work hours
• Holiday pay and paid vacation

Negatives of Unions

• Costs money to be a part of a unions (union dues)
• Have to go along with the majority for job action
• Too high of wages can put pressure on businesses

Union connection to the Charter

• Section 2: Freedom of Association
• Guarantees the right to collective bargaining