Lessons 6–7 · 2 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
6
Economic systems
Textbook: pp. 28–33
GoalDistinguishes economic systems – traditional, centrally planned, market and mixed – by how they answer the three basic questions (What? How? For whom?); explains what an economic cluster is.
New words
economic system: the way a country's economic life is organised · iqtisodiy tizimtraditional economy: basic questions are answered by custom and inherited methods · an’anaviy iqtisodiyotcentrally planned economy: the state owns most means of production and decides by plan · markazlashgan rejali iqtisodiyotmixed economy: combines features of market, planned and traditional systems · aralash iqtisodiyot
Explanation
Every country must find answers to three questions: What to produce? How to produce (with what resources and technology)? For whom to produce, and how is income distributed? Economic systems differ in the way they answer. In a traditional economy the answers rest on customs inherited from ancestors; today such a system is found in remote communities cut off from the outside world. In a centrally planned economy most means of production belong to the state and the centre plans the decisions in advance (this existed in the former Soviet Union and some other states); its strengths are an attempt to ensure employment and stable prices, its weakness is slow adaptation to change. In a market economy property is mostly private, producers and consumers decide freely and demand and supply determine what is produced. In a mixed economy part of the resources belong to the state and the rest to private owners, and the state regulates the economy; most modern countries are like this. In addition, a group of related firms and institutions joining together in one area – an economic cluster – makes production more effective (for example a cotton-textile cluster).
Worked examples
A village community plants rice every year because their grandfathers did; they share the harvest among families by an old custom. This is a sign of a traditional economy: the answers to the three questions come from tradition.
A cluster: a cotton farmer – a spinning mill – cloth weaving – clothes sewing – trade. In one area they supply each other with raw materials and services, so transport costs fall and production speeds up.
Class activity
“Find the system”: the teacher reads four short descriptions (by custom, by plan, by demand and supply, state and private sector together). Groups write and show the name of the system.
Practice
1
Write the three basic questions of economics.
What to produce? How to produce? For whom to produce?
2
Which system? a) the state sets output and prices by plan; b) demand and supply set prices, property is mostly private.
a) a centrally planned economy; b) a market economy.
3
A plant with 80 workers made 40 000 items in 25 days. What is one worker's daily productivity?
20
4
Why can the economy of almost every modern country be called “mixed”?
Because there private firms operate alongside the state, which also produces and regulates the economy; a pure market or pure plan is almost never found.