Three Types of Economies

Types of Economic Systems Traditional Economy Command Economy Market Economy Mixed Economy These economies have different ways of organizing production, distributing goods and services, and providing consumption to solve the problem of scarcity.

Traditional Economy Basic economic decisions are made according to long- established patterns of behavior that are unlikely to change. Family is the basic unit in a traditional economy, but all members of society work together. People in a traditional economy only produce what their communities need.

Traditional Economy Their methods of production are based on their culture and tradition. Societies with traditional economies are usually small. Native American cultures before British settlements are an example of a traditional economy.

Command Economy The government or a central authority (like a dictator) owns or controls the factors of production and makes the basic economic decisions. The government is usually in charge of transportation, communication, banking, and manufacturing. The government usually sets wages (how much people earn at their job) and decides who will work at which job.

Command Economy The government makes all economic decisions for the country or society. The only goods and services available to the people are based on what the government says they can have. Consumers have little or no power in deciding what will be available for purchase. North Korea is an example of a Command Economy.

Market Economy Private individuals own the factors of production and are free to make their own choices about production, distribution, and consumption. Economic decisions are made in a market, which is a place or situation in which buyers or sellers agree to exchange goods or services. Example- farmers markets, New York Stock Exchange, malls, vending machines

Market Economy All people in a Market Economy make their own decisions instead of the government, dictator, or king. Competition is an important part of a market economy. People compete for jobs and producers compete to satisfy consumer’s wants. In a Market Economy, people want to make a profit, or to make more money than they spend.

Market Economy Some people invest in a business which means they give money to start or grow a business. They hope the business will make a profit so they will make more money than what they gave at the beginning. Other names for a Market Economy are Free Enterprise (people in a market economy undertake economic activities with little government control) and Capitalism (individuals decide how to save and use capital for goods and services) United States is NOT a pure example of a Market Economy.

Mixed Economy An economy that is a mixture of the other three basic systems. United States and China are examples of a Mixed Economy.