The way a group of people produce and distribute goods and services. Economic Systems The way a group of people produce and distribute goods and services.

4 Types of Economic Systems Command Traditional Market Mixed

Traditional Economy Definition Characteristics Examples When people grow or make their own goods Characteristics Found in developing countries Use of Barter System (Trade goods for goods) Production & Distribution of goods/services is based on customs and traditions of society. Based on how things were done in the past. Examples Found in remote Rural areas (Congo/Amish) Found in many developing countries

Command ECONOMY Definition: Gov’t makes all economic decisions and controls everything Characteristics: No competition Government determines For Whom, how and what products will be made Prices of products People are not free to choose what to buy or sell

Command ECONOMY Con’t Examples: Communism – economic system in which the central government directs all major economic decisions. Socialism – Government has some controls over basic means of production the rest are privately owned and operated.

Command ECONOMY Con’t Role of Government Make all decisions about what is produced and who gets it

Market ECONOMY Definition: Characteristics: People are free to obtain goods and services in any way they want Characteristics: Competition exists NO Government Interference (Laissez-Faire) Consumers are NOT protected by unfair business practices such as monopolies. Goods are produced to meet public demand (supply & demand). Private businesses produce goods for profit

Market ECONOMY Con’t Examples: Capitalism– Economic decisions for production are made by people and are based on profit motive. No current nation has a true market economy

Market ECONOMY Con’t Role of Government In a true market economy, Government has very little or no involvement; it does not regulate business, nor does it protect consumers

Mixed ECONOMY Definition: Characteristics: Relies on a combination of all the other three economic systems Characteristics: People CHOOSE what they buy and sell. Competition is encouraged. Government regulates business to protect consumers Supply & demand dictate what are produced Sellers motivated by profit

MIXED Economy Con’t Examples: Capitalism United States Most of the countries in the world have some sort of mixed economy

MIXED Economy Con’t Role of Government In a mixed economy, Government sets up regulations in order to protect consumers (break up monopolies; establish minimum wage; create laws to limit pollution, etc…)