Economic Systems

Traditional Market Command Mixed Economic Systems Means by which countries and governments distribute resources and trade good and services. 4 Basic Types: Traditional Market Command Mixed

Traditional Economic System Economic system where all decisions are based on cultural traditions and customs. Traditions are passed down generations. Often hunters, fishers, and gatherers. Things are done the way “they’ve always been done.” Family and Gender Roles - Men, women and children all have jobs to do.

Traditional Economic System Trade or exchange based on resources (corn, woven fabrics, bear skin, deer meat, etc.) NOT money. Can still be found in areas in Asia, Africa and South America

Traditional Economy: * How does this economic system answer the 3 questions? What to produce? People follow their customs and make what their ancestors made How to produce? People grow and make things the same way that their ancestors did. For whom to produce? People in the villages who need them.

Market Economic System Economic system in which prices, wages, and production are determined by consumers and not by the government. Businesses are owned by the private sector. Can lead to income and wealth inequality.

Market Economic System Prices determined by supply and demand. Business owners and managers are motivated by ability to make a profit. Examples: closest to pure market are Hong Kong and Singapore.

Market Economy: * How does this economic system answer the 3 questions? What to produce? This is determined by consumers’ preferences. How to produce? This is determine by producers seeking profits. For whom to produce? This is determined by consumer’s purchasing power.

Command Economic System Economic system where the government owns everything and controls all economic decisions. Government manages all resources and industries. There is no private property. There is equal distribution of income. Government sets prices for goods and determines wages of workers.

Command Economic System Not a successful system because it discourages hard work, innovation and creativity. Ex. Communism, Socialism Examples: North Korea, former Soviet Union.

Command Economy: * How does this economic system answer the 3 questions? What to produce? Completely determined and controlled by central authority (government) How to produce? Completely determined and controlled by central authority (government) For whom to produce?

Mixed Economic System Economic system where both market and government forces impact what consumers can buy. Consists of a mix of government regulation, tradition and free market activity. People can influence the economy a great deal.

Market Economic System Consists of both private companies and government/state-owned businesses. Both have control of owning, making, selling and exchanging goods in the country. Most nations in the world have a mixed economy.

Market Economy: * How does this economic system answer the 3 questions? What to produce? This is determined by consumer preferences and partly by government. How to produce? This is determined by producers seeking profits and partly by government. For whom to produce? This is determined partly by purchasing power of consumers and partly by government preference.

Economic Continuum