Activity 2 page 4
Unit 4: Section 1: Workbook 14: Market and Mixed Economies
To see how supply and demand works and to understand further the role of the consumer and producer, click on the link below and read Supply and Demand.
Supply and Demand diagram
Check your understanding of supply and demand by answering the two Critical Thinking Challenge questions on the bottom of page 211 of your textbook, Issues for Canadians. Refer to the diagram if you need help answering the questions.
Answer the questions in your notes. Store your notes in your Activities folder.
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Read
Read the case study of the "Two Doughnut Shops" on page 212 of your textbook, Issues for Canadians.
Complete a Comparison Chart for the two doughnut shops; you may have to make a few assumptions based on the information provided.
Click on one of the links below to complete the activity.
Comparison Chart (Word)
Comparison Chart (pdf)
Comparison Chart (Google Doc)
Save your completed handout to your Activities folder.
These two doughnut shops are in competition.
competition: the challenge of a producer to sell a product to consumers when other producers want to sell the same product as well
Vocabulary
Add the term competition on your Issues for Canadians Definitions handout, and write a definition for the new word.
Save your updated handout to your Activities folder.
Each shop chose a format that would help it compete. The shops considered the price of materials, the labour costs, and the quality of product.
To keep the prices affordable, the Automatic Doughnut shop chose to make five types of doughnuts with bargain ingredients and machines instead of human labour. In other words, this shop focused on greater supply at a lower price.
Baker's Dozen Doughnuts chose to have specialized bakers hand-make 13 kinds of doughnuts with high-quality ingredients. This resulted in high-quality doughnuts at higher prices.
Each doughnut business answered the three basic economic questions differently because of competition.
Consider how they both answered these questions:
- What goods should be produced?
- How should these goods be produced?
- For whom should the goods be produced?
- land
- labour
- capital
As stated on page 211 of your textbook, "... Producers want to supply as much of a product as consumers will buy, at a price that allows producers to make the most profit possible." When this occurs, the equilibrium price has
been reached.
The most successful companies will be those that produce the best product at the best price. Competition ensures this process occurs. Consumers also benefit from this process by being able to purchase quality goods at reasonable prices.
A monopoly is the opposite of competition. Basically, a monopoly exists when only one producer or supplier of a particular good or service is available.
Think of yourself as a producer who wants control of everything. What happens to the competition?
equilibrium price: the price at which the seller is willing to sell and the buyer is willing to pay
monopoly: a situation in which there is one producer or supplier of a particular good or service
Vocabulary
Add the terms equilibrium price and monopoly to your Issues for Canadians Definitions handout, and write definitions for the new words.
Save your updated handout to your Activities folder.
Read
Read "Monopoly versus Competition" on the bottom of page 213 of your textbook, Issues for Canadians.
Answer the following question in your notes after you read.
- What two courses of action were taken (one by the Canadian government and one by the government of the United States) regarding monopolies?
Save your notes to your Activities folder.
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Workbook Summary
In this workbook, you investigated the following questions.
What is market economy, mixed economy, and command economy?
What are the underlying values and beliefs in market economic systems?
What does scarcity mean to me?
How do the economic systems of Canada and of the United States differ in answering the basic question of scarcity?
A mixed economy is between capitalism and socialism (or a market economy and a command economy) on the economic continuum. This economic system includes both government control and individual freedom in making economic decisions. Again, the amount of government control and spending depends on the government in power.
Scarcity is caused by unlimited wants and limited resources. The factors of production (land, labour, and capital) create scarcity. To solve scarcity, the three basic economic questions must be answered: What goods should be produced? How should these goods be produced? For whom should the goods be produced?
Supply and demand are affected by the prices of products, the availability of products, and the labour connected to creating the products. The consumer and the producer influence supply and demand. The role of the producer is to reach an equilibrium point where the supply of the product meets the demand of the product at a price the consumer will pay for the product.
Market economies rely completely on supply and demand and competition in economic decision-making. In a mixed economy, the decision-making in some areas of the economy is made by the public sector (government); such as in health care and education. The government's involvement may reduce the concern of supply and demand for certain products and services.
In the next activity, you will examine more thoroughly government involvement in the economies of Canada and of the United States.