Name:__________ Date:___________ Mods:__________ Economic Systems Name:__________ Date:___________ Mods:__________

What We Need to Know…… Benchmark A: Compare how different economic systems answer the fundamental economic questions of what goods and services to produce, how to produce them, and who will consume them. Indicator 3: Analyze the characteristics of traditional, market, command, and mixed economies; in particular how they address private property, freedom of enterprise, competition and consumer choice, and the role of government. These terms replace more traditional terms of capitalism, communism, and socialism used in Ohio’s previous graduation test.

I. How do different economic systems meet their peoples’ economic needs? A. People have unlimited wants. B. Nations have limited resources to meet their citizens unlimited wants. C. . A nation’s resources include: LAND, LABOR, AND CAPITAL D. Scarcity: The inability of our existing resources to meet our unlimited wants.

II. Three Fundamental Economic Questions A. Because every society has scarce resources to meet unlimited wants, all societies must seek answers to three basic economic questions: WHAT should be produced? HOW should it be produced? WHO should get what is produced?

III. Economic Systems. A. Economic System: The method that each society uses to answer the three basic economic questions. B. There are 4 main types of economic systems. 1. Traditional 2. Command 3. Market 4. Mixed

III. Ec. Systems Cont. Traditional Market Command Mixed Economic

IV. Market Economy A. Market Economy: an economic system that is controlled by privately owned businesses. B. Market Economies are also called capitalism or free-market system. C. Capitalism operates under free enterprise: individual businesses have the freedom to decide what they will produce and sell to consumers.

V. Adam Smith and A Market Economy A. Enlightenment philosophes applied the theory of natural law to economics. B. They believed in a Laissez-faire economy: the government has little or no control over business. C. Adam Smith: wrote The Wealth of Nations (1776), which he supported a free-market economy where supply and demand would determine prices and other economic decisions.

V. Supply and Demand A. Supply: the amount of a good that is available. B. Demand: the desire of consumers to buy that good. C. The theory of supply and demand states that when supply goes up prices go down. Conversely, When supply goes down and demand goes up prices go up.

Supply and Demand CHECK FOR UNDERSTANDING: 1. What happens to price when Demand is high ex) Bread during the French Revolution? _________________________________________________________ 2. What happens to price when Demand is High and Supply is low ex) XBOX 720? _______________________________________________________________________________________________

V. Command Economy A. Command Economy: A government decides the answers to the three basic economic questions. B. The government determines who should make what and who should receive what is produced. C. Command Economies are sometimes called communism. C. Command economies come at the cost of individual freedom because there is no private ownership of property and everything belongs to the government.

VI. Karl Marx A. Karl Marx was born in Germany in 1818. B. He was concerned with economic problems, particularly how societies might produce and distribute resources fairly. C. Marx was against capitalism, in which he saw private industries competing for profit with little or no government regulation. D. He felt that capitalist systems resulted in a class struggle. E. The inevitable result of this class struggle would be a worker’s revolt.

VII. The Communist Manifesto A. The Communist Manifesto: published in 1848, Marx encouraged the workers of the world to rise up as a class and defeat all wealthy capitalists. B. He believed that one in power, workers would create a new economic system called socialism. C. Socialism: economic system in which resources would be distributed equally by the government to create a classless society. D. Marx proposed that after living under the benefits of a socialist economic system, people would learn to strive for equality rather than for greed and profit. E. Eventually, the need for government itself would fade away because people would live by sharing their resources. F. Marx envisioned this final goal of a workers’ revolution as communism. G. Communism: a system in which there was a classless society without any government.

VIII. Traditional Economy A. Traditional Economy: Basic economic questions are answered according to custom, religious beliefs and tradition. B. In a traditional economy, people follow the occupations of their ancestors. C. For example if your father was a farmer, you would become a farmer. D. Most people in traditional economies are farmers. E. This type of economic system is typical in places that have not yet industrialized. F. In a traditional economy you only produce what you need.

VIX. A Mixed Economy A. Mixed Economy: a blend of two or more economic systems. B. For example, the United States mainly has a market economy however, the U.S. government carries on many public enterprises such as delivering the mail and regulating food and drug distribution.

Mixed X. Mixed Economy Command Market Traditional

Quiz Study Guide Economic System Traditional Economy Command What to Produce? How is it produced? Who gets what is produced? Traditional Economy Command Market Economy