1. They differ according to two main characteristics.
Economic Systems
They differ according to two main characteristics.
Who owns the factors of production
- Government/public or private ownership
2. Methods used to coordinated econ activity
These answer the 3 basic econ questions
(1) what to produce (includes how much)
(2) how to produce
(3) for whom to produce

2. Usually private, could be public
Traditional Systems
Usually private, could be public
2. Customs, beliefs, religion, habit, etc.
Examples: Amish, Eskimo, tribal villages

3. Command Systems Government
2. Government planners decide what will be made, how and for whom (communism)
Founder: Marx

4. Command Systems
Founder: Karl Marx

5. Command Systems Examples: Soviet Union (Lenin), Cuba, N. Korea,
China (was but now has market)
Vietnam (was but starting market)
Russia (was but now doing a really bad job of starting a market)

6. Market Systems Private Ownership 2. Interaction of market forces
(supply and demand) determines
what will be made, how and for whom.
What gets produced is “voted” on by people’s money (prices)
Founder: Adam Smith
Examples: U.S., England, etc. Unless Mixed distinction
Vocab: Laissez Faire: “let it be” =
keep gov’t out of it, A.K.A Pure Capitalism

7. Mixed Systems
USA: Mostly Market Economy, but with some Gov’t interference
1. US GOV: produces
some goods/services
National Defense
Interstate Highway system

8. Mixed Systems 1. US GOV: produces some goods/services Public Works
Hoover Dam
Public Works
Golden Gate Bridge
Erie Canal

9. Mixed Systems
USA: Mostly Market Economy, but with some Gov’t interference
2. Influences What/How/For Whom
only when national need or for
minimum standards

11. Mixed Systems
USA: Mostly Market Economy, but with some Gov’t interference
3. US GOV: redistributes income (Y)
Expenditures
Taxes