Economic systems

Economic systems: A nation’s way of producing things its people want and need Different types of economic systems: Market, Command, & Mixed Three basic questions: What to produce, how to produce, and for whom to produce. Each economic system answers these questions differently.

Market economies All questions are answered by the market---they are decided by businesses and consumers. Laissez-faire economics – belief that the government should not interfere with the economy. Characteristics: Individual freedom Competition Some dealing with externalities Higher GDP

Command economies All questions are answered by the government. Characteristics: Socialism – “Diet Communism” – The factors of production should be owned by society, either directly or through the government. This should make wealth more equal among citizens. Communism - All property has shared ownership, equal distribution of wealth among citizens. Government Control Slow Growth – lower GDP (ex: North Korea)

Mixed economies Most countries actually have a mixed economy. Individuals are free to make economic decisions, but are subject to some government regulations. Sometimes the government even participates as part of the economy! Postal Service, highway system