Types of Economic Systems Supply and Demand Price

Supply and Demand Demand – the amount or quantity of goods and services that consumers are willing to buy at various prices Supply – the amount of goods and services that producers will provide at various prices Equilibrium price – where quantity demanded and quantity supplied meet

Demand Curve for new iPhone 5 Numbers of phones demanded (in thousands) Price per phone $

Supply Curve for new iPhone 5 Cost of iPhone Number of phones demanded (in thousands)

Market Economy Economic decisions are made in the marketplace according to the laws of supply and demand Marketplace – anywhere money changes hands Also called – private enterprise system; capitalism – Resources privately owned – You decide how to run business; what to sell; what to charge; where to shop

Command Economy A central authority makes the key economic decisions; usually the government or state Also called planned or managed economy A strong command economy is known as communism-state makes all economic decisions and controls all resources for the common good A moderate command economy is known as socialism-state owns major resources and makes key economic decisions – Some form of private enterprise; individuals may own some businesses

Mixed Economy A combination of market economy and command economy State (government) takes care of people’s needs while the marketplace takes care of people’s wants U.S. has a mixed economy – Government – defense, education… – Marketplace – cars, computers, fast food…