1. ECONOMIC SYSTEMS

2. Traditional Custom & tradition determine: What should be produced
How it should be produced
Who gets what is produced

3. Traditional (cont.)
Subsistence agriculture – families grow just enough to feed themselves
Still found in rural, non-industrial areas

4. Free Enterprise AKA capitalism or free market
People are free to produce & buy what they want

5. Free Enterprise (cont.)
The 3 economic ?’s are answered by the interplay between consumers & producers
What should be produced
How it should be produced
Who gets what is produced

6. Supply & Demand PRICES are determined by supply & demand.
When demand is high, price goes up.
If supply is high, but demand is low, price goes down.
If a producer charges too much for an item, other producers will sell the item at a lower price and outsell that producer.

7. Socialist Government owns & operates many basic industries
Seen as the protector of the worker
Private ownership encouraged

8. Communist Government owns & operates all businesses
Create a national plan for the production & distribution of all goods and services
Cooperation is supposed to replace competition
No social classes

9. Advantages
Disadvantages
Traditional
Custom and tradition are maintained.
There isn’t competition, as things are owned by the family or village.
Less of a demand on resources/no waste
Individuals may not choose their position in society and occupation is determined at birth.
New ideas are discouraged and change and growth are slow.
Very little trade with outsiders
Free Enterprise
Choice in determining what to produce and how
Right to own private property
Little government interference
Ability to make profits
Risk of losing money in business
Lots of competition
Socialist
Encourages private ownership
Does not involve state planning
Government protection of workers
People’s basic needs (health care, transportation, education, housing) are met for free or at a very low cost
Nation’s most important businesses are owned by the government (could also be seen as an advantage)
Resources controlled by the government
Communist
No competition
Based on cooperation, in which all workers should labor together and share equally
Supposed to be beneficial for all
Goal is to achieve a classless society
All economic decisions are made by government
All resources/industries controlled by the government
No private property ownership; national ownership of all land, factories, farm, resources
No incentives for workers
Many former Communist countries abandoned communism as corruption became widespread

10. Role of the Government Traditional – no role
Free enterprise – little government interference
Enforces rules, monitors money, & protects people’s rights
Makes sure companies don’t gain too much power

11. Role of the Government (cont.)
Socialist – controls the major resources & industries
Makes decisions about production, distribution, & use of resources
Communist – controls all resources & makes all decisions
Specifies which goods each factory will make