1. Major Economic Systems
STANDARD CE.11b

2. The Three Basic Questions of Economics
Each type of economy answers the three basic questions differently.
What will be produced?
Who will produce it?
For whom will it be produced?

3. 4 basic types of economic systems
Traditional economy
Free market economy (Capitalism)
Mixed economy
Command economy (Communism)

4. What are the basic characteristics of a traditional economy, free market, command, and mixed economies?

5. Traditional Economy

6. Economic decisions are based on custom and historical precedent.

7. People often perform the same type of work as their parents and grandparents, regardless of ability or potential.

8. Examples in practice today:
Many poor regions in:
Southern Mexico
South America
Africa

9. Free market economy (Capitalism)

11. Free market economy (Capitalism)
Private ownership of property/resources
Profit motive
Competition
Consumer sovereignty
Individual choice
Minimal government involvement in the economy
Consumers
tell producers of
goods
what to produce

12. Explained in Cow Terms
You have two cows. You sell one and buy a bull.

13. Examples in Practice
Great Britain
Japan

14. Command economy (Communism)

15. Karl Marx
Communist Manifesto (1848)

17. Central ownership (usually by government) of property/resources

18. Centrally-planned economy

19. Lack of consumer choice

20. Explained in Cow Terms If they decide that you really need it
You have two cows. The government takes them both and provides you with milk.
If they decide that
you really need it

21. Examples in Practice
Cuba
N. Korea

22. Command economy (Communism)
Central ownership of property/resources
Centrally-planned economy
Lack of consumer choice

23. Mixed economy

24. Individuals and businesses as decision makers for the private sector

25. Government as decision maker for the public sector

26. A greater government role than in a free market economy and less than in a command economy.

27. Most common economic system today

28. Mixed economy
Individuals and businesses as decision makers for the private sector
Government as decision maker for the public sector
A greater government role than in a free market economy
Most common economic system today

29. Every country must develop an economic system to determine how to use its limited productive resources.
The key factor in determining the type of economy a country has is the extent of government involvement.

30. Characteristics of major economic systems
No country relies exclusively on markets to deal with the economic problem of scarcity.

31. QUIZ

32. The type of economy is determined by the extent of government involvement in —
a. business creation
b. taxes
c. economic decision making
d. fund-raising

33. Which of the following is not a type of major economic systems?
a. Free market
b. Cost market
c. Command economy
d. Mixed economy

34. Which of the following is not a characteristic of a command economy?
a. Central ownership of property/resources
b. Centrally-planned economy
c. Private ownership of property/resources
d. Lack of consumer choice

35. Individuals and businesses as decision makers for the private sector is a characteristic of a —
a. free market
b. cost market
c. command economy
d. mixed economy

36. Which of the following is not a characteristic in a mixed economy?
a. Government as decision maker for the public sector
b. A greater government role than in a free market economy
c. Most common economic system today
d. Central ownership of property/resources

37. Private ownership of property/resources is a characteristic of a —
a. free market
b. cost market
c. command economy
d. mixed economy

38. All of the following are characteristics of a free market except —
a. profit
b. competition
c. consumer sovereignty
d. lack of consumer choice

39. Individual choice is a characteristic of a —
a. free market
b. cost market
c. command economy
d. mixed economy

40. The economy of the United States of America is a —
a. free market
b. cost market
c. command economy
d. mixed economy