1. Economic Systems
E.Q: What are the 3 questions each country must answer to decide on its economic system?

2. Different Economic Systems
Scarcity refers to the limited supply of something
Every country must deal with the problem of scarcity since no country has everything that its people need/want
Every country must develop an economic system to determine how to use its limited resources to answer the three basic economic questions:
What goods/services will be produced?
How will goods/services be produced?
Who will consume the goods/services?
The way a country answers these questions determines its economic system

3. Traditional Economy
An economic system in which economic decisions are based on customs and beliefs
People will make what they always made & will do the same work their parents did
Exchange of goods is done through Bartering: trading without using money

4. Traditional Economy Who decides what to produce?
People follow their customs and make what their ancestors made
Who decides how to produce goods & services?
People grow & make things the same way that their ancestors did
Who are the goods & services produced for?
People in the village who need them

5. Traditional Economies
Examples:
Villages in Africa and South America
the Inuit tribes in Canada
the caste system in parts of rural India
the Aborigines in Australia

6. Command System
Government makes all economic decisions & owns most of the property
Governmental planning groups (Central Planners) determine such things as the prices of goods/services & the wages of workers
This system has not been very successful & more and more countries are abandoning it

7. Command Economy Who decides what to produce?
Government makes all economic decisions
Who decides how to produce goods and services?
Government decides how to make goods/services
Who are the goods and services produced for?
Whoever the government decides to give them to

8. Command System
Countries with communist governments have command economies
Examples: Cuba, former Soviet Union, North Korea
The government of Australia controlled one part of the economy in the past -- government-owned companies controlled telecommunications
Government set the price for having a phone, the cost of calls, and wages were the same in all parts of the country
In 1989, the company was made into a private business with stockholders owning the company

9. Market Economy
An economic system in which economic decisions are guided by the changes in prices that occur as individual buyers and sellers interact in the market place
Most of the resources are owned by private citizens
Economic decisions are based on Free Enterprise (competition between companies)
Important economic questions are not answered by government but by individuals
Government does not tell a business what goods to produce or what price to charge

10. Market Economy Who decides what to produce?
Businesses base decisions on supply and demand and free enterprise (PRICE)
Who decides how to produce goods and services?
Businesses decide how to produce goods
Who are the goods and services produced for?
consumers

11. Market Economy
There are no truly pure Market economies, but Australia’s is close:
It is considered one of the most free economies in the world
Businesses operate without too many rules form the government
People are free to start a business and can do so quickly
Courts use the laws of Australia to protect the property rights of citizens

12. In a truly free market economy, the government would not be involved at all
There would be no laws to protect workers form unfair bosses
There would be no rules to make sure that credit cards were properly protected
Many societies have chosen to have some rules to protect consumers, workers, and businesses (MIXED)
These rules reduce the freedoms that businesses have, but they also protect the workers and consumers

13. Mixed Economy Market + Command = Mixed
There are no pure command or market economies. To some degree, all modern economies exhibit characteristics of both systems and are often referred to as mixed economies.
Most economies are closer to one type of economic system than another
Businesses own most resources and determine what and how to produce, but the government regulates certain industries

14. Mixed Economy Who decides what to produce?
businesses
Who decides how to produce goods and services?
Businesses, but the government regulates certain industries
Who are the goods and services produced for?
consumers

15. Mixed Economies
Most democratic countries fall in this category (there are no truly pure Market or Command economies).
Examples: Brazil, Mexico, Canada, UK, US, Germany, Russia, Australia, etc.

16. Analyze the Economy Continuum
Command
Market UK US
Germany
Cuba
Russia
Australia
Analyze the Economy Continuum
Create at least 4 question/true statement based off the information from the Economy Continuum.

17. Who Am I (Economic Sys.) Market Economy Mixed Economy Traditional
Command
Economy
What is determined to be important by govt.
Determine by demand but govt. may regulate
some pricing or production
Farm Goods; Livestock
Determined by demand
Determined by makers & sellers but govern-
ment may regulate safety
Gathering; Hunting; Hand Work
Amounts determined by govt.
Determined by makers and sellers
Private Individuals but the government may own some business and factories
Family; Group
Govt. Workers
Individuals and Groups

18. Economy Notes Traditional Economy Command Economy Market Economy
Mixed Economy