1. How are resources, goods, and services allocated?
Economic Systems
How are resources, goods, and services allocated?

2. Review Most everything we want is scarce
Therefore we need to make choices
But every choice involves costs
So we need to choose wisely
In order to choose wisely we need to think
When thinking we need to use facts to compare costs and benefits

3. Individual Decisions It’s hard enough to manage your own decisions
So many options
So many factors
But at least it’s only you

4. How does a whole society handle making decisions?
What decisions need to be made?
What is made?
How is it made?
Who makes it?
How is it distributed?
How is it consumed?
And who makes all these decisions?

5. What we need is a system
Organized means by which questions of production and allocation are answered
L1 questions, plus ‘how,’ all answered by an Economic System
Broad social goals establish ‘why’ it’s that way

6. Basic Factors of Production
Land
Labor
Capital
Entrepreneurship

7. Three Basic Systems
Traditional
Market
Command

8. Traditional Factors of Production employed based on tradition
Inflexible
Little room for movement or change

9. Market Private individuals and firms make most decisions
Production, allocation, and consumption highly dynamic

10. Command Production & allocation based on government’s decisions
Little flexibility
Little room for individual enterprise

11. Costs & Benefits Each system has strengths and weaknesses
Social and individual values determine which is best for a given people
What do you value?

12. Characteristics of a Market Economy
Private Property
Free Enterprise
Self-Interest
Competition
System of Markets and Prices
Limited Government