Presentation on theme: "Economic Systems Compare different types of economic systems: traditional, free enterprise, command and mixed."— Presentation transcript:
1 Economic SystemsCompare different types of economic systems: traditional, free enterprise, command and mixed.
2 Why Economic Systems?Nations use economic systems to determine how to use their limited resources effectively.Primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.Different types of Economic SystemsTraditional EconomyMarket Economy (free enterprise & capitalists)Command EconomyMixed Economy
3 Market Economy (Free Enterprise) Supply and demand of goods and services determine what is produced and the price that will be charged.Advantage—competition to have the best products and servicesDisadvantage—huge rift between wealthy and poorNote: a true market economy does not exist.Also called a Free Market Economy or Free Enterprise Economy. Also called Capitalist EconomyBusinesses and consumers decide what they will produce and purchase and in what quantitiesDecisions are made according to law of supply & demandPrivate ownershipPrivate gainsFreedom of choiceFreedom of occupational choiceGoods and products reach the hands which have higher purchasing power
4 Command Economy Advantages Disadvantages The government (or central authority) determines what, how, and for whom goods and services are produced. Regulated and managed by government.Freedom of choice for producers and consumers is curbed to what a society can produce for all.Determines pattern,level ,technology and distribution of total productionTwo types:Strong Command – where government makes all decisions (Communist– China, Cuba)Moderate Command – where some form of private enterprise exists but the state owns major resources (socialism – France and Sweden)AdvantagesGuarantees equal standard of living for everyoneLess crime and povertyNeeds are provided for through the governmentDisadvantagesMinimal choicesFewer choices of itemsNo incentive to produce better product or engage in entrepreneurshipAlso known as a Planned or Managed Economy
5 Mixed EconomyCombination of a market and a command economyGovernment takes of people’s needsMarketplace takes care of people’s wants.The one which has public sector and private sectorMost nations have a mixed economy: United States, England, AustraliaAdvantage—balance of needs and wants met by government and in marketplace