1. Economics Economic Systems

2. What is an Economic System? The way in which a nation uses its economic resources to satisfy peoples wants and needs. Each economic system answers the 3 Basic Questions: 1. What should be produced? 2. How should it be produced? 3. For whom should it be produced?

3. Types of Economic Systems The 4 major economic systems all answer the 3 Basic Questions differently. There are 4 major types of economic systems: Traditional Command Market Mixed

4. Traditional Economy 3 Questions are answered according to tradition, customs, and beliefs. Ideas, skills, and rules are handed down from generation to generation. + = Known expectations, strong fam/ community. - = change/innovation is discouraged, choice is very limited, production is inefficient. Examples: Inuit of NA, Kalahari of Africa.

5. Command Economy 3 Questions are answered by the government. Individual business owners have little say in what is produced, how much is made, etc. The government also decides how goods are distributed. + = Decisions can be made quickly - = lack of incentive to work hard, be creative; also lack of choices Examples: North Korea, China, former Soviet Union

6. Market Economy Also known as Capitalism. The goal is to make a profit (profit=price-cost) 3 Questions are answered by individuals/ business owners with no government intervention. Prices determine themselves based on supply and demand. + = Many choices, potential for profit, creativity is rewarded, competition means lower prices, better quality. - = Those unable to work may suffer, owners may take advantage of workers.

7. Mixed Economy Our economy in the U.S. is not a pure market economy. It is a combination of a market economy and a command economy….this is known as a mixed economy. Most countries have a mixed economy. Individual decision making is combined with government intervention and regulation. For example: Govt. may set the price that utility companies can charge for their product or the government may put regulations on what businesses can or cannot do.