Economic Development Notes
<aside> 💡 From this unit, you must know…
Key Vocabulary and Terms
| Economics | The study of how individuals, businesses, and nations (countries) make and buy things and how they spend and save money |
|---|---|
| Scarcity | state of being scarce or in short supply; shortage |
| Traditional Economy | Economies that meet people’s basic needs as a family and community, based on customs and beliefs handed down from previous generations. |
| Subsistence Farming | When farmers grow enough to feed themselves and their family, not farming for profit |
| Cottage Industries | When goods like textiles are produced in private homes by hand |
Economics tries to answer the questions of scarcity. For example, if we have limited resources, what do we produce? How will we produce it? And lastly, who gets it?
Different economic systems answer these questions in different ways. One type of economy, a traditional economy meets people’s basic needs as a family and community. This means that the goal of a traditional economy is to benefit a single family and community.
They usually do so based on customs and beliefs handed down from previous generations.
As a result, they would not work well for large communities (more than a few families), because as communities grow larger, people begin to have diverse needs. This means that most societies outgrow traditional economies.
There are three important elements of traditional economies: 1. Only enough food is grown to feed a family (subsistence farming); 2. Most goods are produced in private homes by hand (cottage industries); and 3. Goods are exchanged for other goods, instead of using money (bartering).
| | Communism/ Command Economy | Socialism | Capitalism/Free Enterprise | | --- | --- | --- | --- | | Government | • Government sets economic goals | • Government owns some basic industries | • People freely produce and buy what they want • There is little to no government interference | | Private Businesses | • Private property ownership is abolished | • Private ownership of smaller businesses is allowed | • Producers invest their money to make profit | | Welfare | • Workers labor together and are supposed to share equally | • Government provides low-cost or free public services, usually paid for with taxes | • Prices set by supply and demand • Inefficient producers are eliminated by going out of business |
In capitalism, agriculture and industries focus on widespread production with the goal of selling the maximum number of products possible to consumers. This is known as commercial agriculture/industries.
Most economies around the world don’t strictly follow one economic system but mix elements of all three.