2Economic SystemIs an organized way for a country to decide how to use it’s productive resources; that is, to decide what, how, and for whom goods and services will be produced.Economics is the body of knowledge that relates to producing and using goods and services that satisfy human wants.
3Business’ help to make the economic system work by producing and distributing the particular goods and services that people want. The economic system operates on the basis of economic wants.Economic wants is the desire for scarce material goods and services. People want material goods, such as clothing, housing, and cars. They also want services, such as hair care, medical attention, and public transportation.Non-Economic wants are desires for non-material things that are not scarce, such as air, sunshine, friendship, and happiness.
4Factors of ProductionIn creating useful goods and services, a producer uses four basic resources. These resources, called factors of production, are land (natural resources), labor, capital goods, and entrepreneurship.
54 Basic Economic Systems Market Economy – is an economic system in which individual buying decisions in the marketplace together determine what, how, and for whom goods and services will be produced.In a market economy, individual citizens, rather than the government, own most of the factors of production, such as land and manufacturing facilities.Example:If more consumers choose to buy whole-grain bread than white bread, their buying decisions will influence bread producers to use their productive resources to produce more whole-grain and less white bread.The free enterprise system found in the United States is the best example of a market economy.
6Command EconomyA command economy is an economic system in which a central planning authority, under the control of the country’s government, owns most of the factors of production and determines what, how, and for whom goods and services will be produced.Countries that adopt a command economy are often dictatorships.The government, rather than consumers, decides how the factors of production will be used.Forms of command economies exist in some Asian countries such as North Korea, Cambodia, and Vietnam and in other small countries such as Cuba.
7Mixed EconomyA mixed economy is an economic system that uses aspects of a market and a command economy to make decisions about what, how, and for whom goods and services will be produced. In a mixed economy, the national government makes production decisions for certain goods and services.For example, the post office, telephone system, schools, health care facilities, and public utilities are often owned and operated by governments.
8Mixed EconomyNo country has a pure market economy or command economy. All have mixed economies, although some have more elements of a market economy and others have more elements of a command economy.In the United States and Canada for example, the government plays, a smaller role in the economy than it does in the more command-oriented economies like Sweden and Cuba.The more command-oriented economies have now allowed some privately owned businesses to operate freely and make their own economic decisions, such as what to offer for sale and at what prices.
9Traditional EconomyAn economic system in which people do things the way they have always done them. A traditional economy is influenced by:HabitsCustomsReligious beliefs
10Traditional Economy Characteristics An economic system heavily influenced by habits, customs, and religious beliefs.Children generally “inherit” the occupations of their parents.Difficult to introduce new ideas.
11QuestionsHow does an economic want differ from a non-economic want? Give an examples of each.List the four basic factors of production.How is a market economy different from a command economy?What is an Economic System?What countries are still running under a command economy?What kind of economy is the United States?What are some characteristics of a traditional economy?List 2 characteristics of a mixed economy.List 2 characteristics of a command economy.What type of economy would you prefer to have?