1. Economic Systems

2. What is an economic system? It is a system that describes how a country’s economy is organized Every country needs a system to determine how to use its resources to produce goods and services A country’s economic system must answer 3 basic questions....

3. The 3 Basic Questions: 1. What to produce? – What kinds of goods and services should be produced 2. How to produce? – What resources are used to produce goods and services 3. For whom to produce? – Who gets to have the goods and services produced

4. What types of Economic Systems are there in the World? There are 4 types of economic systems – Traditional – Command – Market – Mixed

5. Traditional Economy An economic system in which economic decisions are based on customs and beliefs People will make what they have always made and will do the same work their parents did Exchange of goods will be through bartering or trading without using money

6. Let’s answer the 3 basic questions for a Traditional Economy Who decides what to produce? – People follow their customs and beliefs and make what their ancestors made Who decides how to produce goods and services? – People grow and make things the way their ancestors did Who are the goods and services provided for? – people in the village who need them

7. Examples of a Traditional Economy Inuit Tribes in Northern Canada Farm villages in South America Farm villages in India

8. Command Economy An economic system in which the government makes all economic decisions and owns most of the property These workers are making what the government ordered them to make This factory is owned by the government and produces products they think need to be produced The government decides what crops to plant

9. Let’s answer the 3 basic questions for a Command Economy Who decides what to produce? – Government makes all decisions Who decides how to produce goods and services? – Government decides how to make the products Who are the goods and services provided for? – Whoever the government thinks should have them and how much they should have

10. Examples of a Command Economy Countries with Communist governments have command economies. Today, Cuba and North Korea both have command economies

11. Market Economy An economic system in which private individuals own most businesses and decide what products and services to provide and how much to charge Most resources are owned by private individuals The government does not tell businesses what or how much to produce or what price to charge

12. Let’s answer the 3 basic questions for a Market Economy Who decides what to produce? – Businesses base their decisions on supply and demand (price of goods and services) Who decides how to produce goods and services? – Businesses decide what to produce and how much to produce based on supply and demand Who are the goods and services provided for? – consumers

13. Examples of a Market Economy There are no “pure” market economies today. The United States is close.....

14. Mixed Economy Market economy + Command economy = Mixed Economy Businesses own most resources and determine what and how to produce  Government regulates or controls some parts of the economy (services and resources)

15. Let’s answer the 3 basic questions for a Mixed Economy Who decides what to produce? – businesses Who decides how to produce goods and services? – businesses but the government controls some too Who are the goods and services provided for? – consumers

16. Examples of a Mixed Economy Most countries that are democracies have mixed economies – Brazil, Mexico, Canada, U.S., and United Kingdom

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