2. Economic System The way people produce and exchange goods and services

3. The Four Types of Economic Systems Four very different types of Economic Systems have evolved as different societies have placed different emphasis on different goals and priorities in their efforts to answer the Three Key Economic Question.

4. Traditional Economy Family or Community based Economic System that relies on custom and ritual to make its choices. Examples: –Aborigines –Amazon Tribes –Any Subsistance Economy

5. Market Economy Individual or Consumer based Economic System that relies on the consumption choices of consumers. Examples: –*The U.S.A.? –*Japan? –Any Capitalist Economy?

6. Command Economy Centrally Controlled Economy where the Government makes all decisions. Examples: –Cuba –China? –Any Communist Country or Dictatorship

7. Socialist (Mixed) Economy Economic System that incorporates some Governmental involvement into a Market Based Economy. Examples: –*The U.S.A.? –*Japan? –*China? –Most “Modern” Economies

8. Types of Economic Systems Free MarketCommandTraditionalSocialist

9. Types of Economic Systems Free MarketCommandTraditional People freely produce and buy what they want Prices are set buy Supply and Demand Producers invest their money to make a Profit Little Government interference Free Enterprise, Capitalism Market Economy Socialist

10. Types of Economic Systems Free MarketCommandTraditional People freely produce and buy what they want Prices are set buy Supply and Demand Producers invest their money to make a Profit Little Government interference Free Enterprise, Capitalism Market Economy Socialist Government makes all economic decisions Workers are supposed to share equally No private property

11. Types of Economic Systems Free MarketCommandTraditional People freely produce and buy what they want Prices are set buy Supply and Demand Producers invest their money to make a Profit Little Government interference Free Enterprise, Capitalism Market Economy Government provides free or low-cost public services: school, health care, etc. Government owns some basic industries Government makes all economic decisions Workers are supposed to share equally No private property Socialist

12. Types of Economic Systems Free MarketSocialistCommandTraditional People freely produce and buy what they want Prices are set buy Supply and Demand Producers invest their money to make a Profit Little Government interference Free Enterprise, Capitalism Market Economy Government provides free or low-cost public services: school, health care, etc. Government owns some basic industries Government makes all economic decisions Workers are supposed to share equally No private property People work to meet their basic needs Subsistence Agriculture: Farmers grow enough to feed their families Cottage Industry: Goods are produced in private homes by hand

13. Economic Activities Primary – Gathering raw materials Secondary – Adding value to materials by changing their form. Tertiary – Business or professional services Quaternary – Providing information, management or research services

14. Natural Resources Renewable – Can be replaced by natural processes Examples: trees, seafood, Non-renewable – Cannot be replaced once used Examples: coal, petrolium, natural gas Inexhaustable – Unlimited supply Examples: sunlight, wind, geothermal heat