1. Economic Systems

2. Economic Systems
An economic system describes how a country’s economy is organized.
An economic system must answer three (3) basic questions…

3. Economic Systems
a. WHAT (goods/services) TO PRODUCE? b. HOW TO PRODUCE? c. FOR WHOM TO PRODUCE (who gets the G/S)? **The way a society answers these questions determines its economic system.

4. Traditional Economy – basic definition
Are based on customs + beliefs
People will make what they always have made
Do the same work their parents did
Use bartering

5. Traditional Economy – who answers 3 basic questions
customs + traditions (previous generations)
people grow & make things the same way that their ancestors did
people in the village who need them

6. Traditional Economy - Examples
villages in Africa and South America
Inuit tribes in Canada
Aborigines of Australia

7. Command System - definition
government makes all economic decisions & owns most of the property
Set prices of goods/services
Set the wages of workers
This system has not been very successful - countries are abandoning it.

8. Command Economy – who answers the 3 basic questions
government makes all economic decisions
government decides how to make goods/services
whomever the government decides to give them to

9. Command System - Examples
countries with communist governments (or dictators) have command economies
Examples:
Cuba
former Soviet Union
North Korea

10. Market Economy – basic definition
economic decisions are based on what the people want! And how much they’re willing to pay!
economic decisions are based on free enterprise (competition between companies)

11. Market Economy – who answers the 3 basic questions
businesses base decisions on supply and demand and free enterprise (PRICE)
businesses decide how to produce goods
consumers

12. Market Economy - examples
There are no truly pure market economies.
**USA is the closest to this**

13. Mixed Economy – basic definition
Market + Command = Mixed
Businesses own most resources and determine what and how to produce, but the government regulates certain industries.

14. Mixed Economy – 3 basic questions
Businesses
businesses, but the government regulates certain industries
consumers

15. Mixed Economy - examples
Most democratic countries fall in this category (there are no truly pure market or command economies).
Examples:
USA
Brazil
Mexico
Canada
United Kingdom