1. Economic Systems
How we answer the three basic economic questions: what, how, and for whom?

2. Four Systems
Traditional
Command
Market
Mixed

3. Traditional Economies
Advantages
Everyone involved knows which role to play
TRADITION
Societal norms

4. Traditional Economies
Disadvantages
Discourages new ideas and ways of doing things
Punishment for ‘breaking the rules’
Lower standard of living due to lack of progress
Sheltered from the global economy and innovation

5. Traditional Economy

7. Command Economy Advantages
Change direction drastically in a relatively short time
Health and public services are available to everyone at little or no cost regardless of income

8. Command Economy Disadvantages Does not meet the needs of the consumer
Lack of incentive
Large decision making bureaucracy
Lack of flexibility to deal with problems
Innovation is stifled

9. Command Economy

11. Market Economy Advantages Able to adjust to change gradually
Individual freedom for everyone
Lack of government interference
Decentralized decision making
Incredible variety of good and services
High degree of customer satisfaction

12. Market Economy Disadvantages
Rewards only productive services (does not provide for people too young, too old, or too sick to work
Workers and businesses face uncertainty as a result of competition
Does not produce enough public goods such as defense, universal education, or health care
Must guard against market failure