1. Traditional – Command - Mixed
Economic Systems
Traditional – Command - Mixed
Every nation when making decision (because of scarcity) has to answer the 3 basic questions when trying to figure out whether to trade (comparative advantage) and how to use resources

2. 3 Basic Economic Questions:
1) WHAT to produce?
2) HOW to produce?
3) FOR WHOM to produce?

3. A) Traditional
a) immune to change
b) follow customs and tradition
c) everyone has a role/job
* How does it answer the 3 basic questions? (how it has always been done = Custom)

4. A) Principles the TRADITIONAL system upholds:
1) voluntary exchange: free trade
2) between people to get wants/needs
3) met (based on mutual satisfaction)

5. B) COMMAND/CENTRALLY PLANNED
a) socialist/communist nations
b) Karl Marx (Communist Manifesto)
* How does it answer the 3 basic Questions? (The Government makes all the decision = Total Government Control)

6. B) Principles the COMMAND systems upholds:
1) Competition: battle to be the best/strongest/most successful
2) Government regulation: policies implemented by the government to
control/maintain practices
* why regulate?
a) to keep any one group from getting too much power
b) to ensure price, quantity, and quality of products

7. (All systems today are actually Mixed…but some have more government control the others)

8. C) MIXED
a) nations must have some government intervention
(healthcare, transporation, education)
b) John Maynard Keynes
c) AKA: Capitalism
* How does it answer the 3 basic questions?
(Some government control = invididuals, business, and
government all involved in answering)

9. C) Principles the MIXED system upholds:
a) Voluntary exchange
b) Self interest: do what is best to benefit you
c) Consumer sovereignty: people control what is produced, and how much they are
willing to pay
d) Private Ownership: people, business, and government can all own and control
property (factors of production)
e) profit motive: goal is to make $
f) Government regulation
g) Competition

10. D) Free Market
a) laissez faire (the government should not intervene
b) Adam Smith (the invisible hand)
c) the marketplace will run itself because of competition and self-
interest
* How does it answer the 3 basic questions? (whatever consumer/producer wants…No Government Control)

11. D) Principles of the FREE MARKET system upholds: 1) voluntary exchange
2) profit motive
3) competition
4) self-interest
5) consumer sovereignty
6) private ownership