1. Economic Systems
Market vs. Command

2. Economic Systems Two Broad Categories:
Market Economy (Capitalist)
Command Economy (Planned)
NOTE: No country has a pure Market or pure Command Economy….all are mixed.
Command
Market

3. Economic Systems
How do we determine, or measure, the type of economic system you have?
Three Questions are asked:
What goods and services are produced?
How should these be produced?
For Whom should these be produced?

4. Economic Systems
Market Economy

5. Economic Systems - Market
1st Question
What goods should be produced?
Consumers decide.
Meet their wants and needs. If consumers don’t want it, it won’t be produced.

6. Economic Systems - Market
2nd Question
How should goods be produced?
Businesses decide.
They will compete with other companies and products. The individual companies must find the most efficient way to produce to be able to succeed.

7. Economic Systems - Market
3rd Question
For Whom should goods be produced?
For whomever can afford it.
If you do not have money you cannot buy the good. TOO BAD. Nobody is entitled to goods or services. To be able to buy goods, people are motivated to work and earn money.

8. Economic Systems
Command Economy

9. Economic Systems - Command
1st Question
What goods to produce?
Government decides.
They choose what is important to spend resources on. EX: military vs. furniture. Thus, there may be shortages for goods that aren’t deemed important by Govt.

10. Economic Systems - Command
2nd Question
How should goods be produced?
Government decides.
Govt owns the means of production. They employ workers and control industry. They set wages and determine schedules. No bargaining or competition.

11. Economic Systems - Command
3rd Question
For Whom should goods be produced?
Government decides who gets what and how much.
All people share equally in wealth. Every one has basic needs met. Govt provides housing (dictates where to live), provides food (decides what to eat), provides jobs (determines where to work).

12. Economic Systems (REVIEW)
Two Broad Categories:
Market Economy (Capitalist)
Command Economy (Planned)
NOTE: No country has a pure Market or pure Command Economy….all are mixed.
Command
Market

13. Economic Systems
Mixed Economies

14. Economic Systems - MIXED
All economic systems are Mixed.
To what degree?
Three Models (philosophies)
Capitalist Model
Socialist Model
Communist Model
Command
Market
Communist
Socialist
Capitalist

15. Economic Systems
Capitalism

16. Economic Models – Capitalist
Same as Free Enterprise
Characterized by private ownership and competition
Government stays out of business way
Make profit (corporate and individual)
Help those who cannot help themselves

17. Economic Model - Capitalism
This model allows for open competition and for making a profit. Profit provides motivation to succeed and competition required efficiency and price control.
Because government does not “provide” for people but allow them to purchase and own what they want, individuals are motivated to work to earn money for purchases.

18. Economic Systems
Socialism

19. Economic Model - Socialist
Government reduces difference between rich and poor. (Classless system)
Key industries run by government (control prices / provide employment)
Provide services for all. “Cradle to Grave”
High taxes to provide services

20. Economic Model - Socialist
This model believes there should be one class. Socialist also believe that all people should have services provided for them…health care, schooling, pensions.
(Cradle to grave coverage)
To do this, those who make money are taxed heavily to “redistribute wealth” and provide all with services. Businesses highly regulated (vacations, hours, etc)

21. Economic Systems
Communism

22. Economic Model - Communist
Government runs everything.
All people are assigned jobs / school
Housing assigned according to need
Medical care is free
Government determines products

23. Economic Model - Communist
This system provides no incentive to work and earn money as the government dictates what you make and were you work. Additionally, you are provided for if you do not work.
System fails as there is no competition to improve technology or efficiencies.
Privatization happens (allowing businesses to be privately owned…not govt owned)

24. Economic Systems
Global Trends

25. Economic Systems - MIXED
All economic systems are Mixed.
North Korea
Cuba
China
Russia
France
Germany
Canada
Japan
United States
Hong Kong
Communist
Socialist
Capitalist
Command
Market