Economic Systems

3 Basic Economic Questions What are we going to produce (make)? How are we going to produce (make) it? For whom are we producing (making the goods)?

4 Factors of Production Land: Provides (gives) the natural resources Labor: Provides the man power. Capital: Provides the equipment and tools to do the job Entrepreneur: The business person who provides the idea

Traditional System Decisions based on traditions, customs, and beliefs. No government control Jobs handed down from generations to generations (jobs: farming, hunting and gathering, or herding) Ex: poor/developing countries

Command System Individuals have little influence over how economic decisions. The Government has total control and decides which jobs individuals will have, how much they will make, and for whom they will produce (or make) the goods Ex: mostly in Communist countries (ex: the old Soviet Union, North Korea, & Cuba)

Market/Capitalist System The government does not get involved at all. Ex: Most of Europe (has between a market and mixed economy; such as the United Kingdom) Decisions are guided by changes in prices between buyers and sellers. Supply-The amount of goods (things/resources) available Demand-How many consumers (people) want the goods

Mixed System The people and the government make the major economic decisions for a country. There is some government control. Ex: The United States and most other countries today