1. Economic Systems
Traditional Economy

2. We Need A System
We know the there are limited resources and everybody needs to deal with the problem of scarcity.
So what kind of systems have we developed to deal with this?

3. Traditional Economy

4. Traditional Economy Overall goal is survival
It is about the group, what the individual wants is really not important.

5. Advantages of a Traditional Economy
Everyone knows their role.
Life is generally predictable and stable.
Almost everyone is taken care of, provided you are doing your part.

6. Disadvantages of a Traditional Economy
This system resists change. It has been the same for thousands of years.
This lack of progress leads to a lower standard of living.

7. Command Economy

8. Command Economy
Government decides what goods and services are produced.
Individual consumers are not considered
It is what the government thinks you need

9. Advantages In A Command Economy
Everybody has a job.
The Economy can change direction
quickly.

10. Disadvantages In A Command Economy
This system in not designed to meet the “wants” of consumers.
The basic incentive of this system is to do just enough to meet quotas.

11. Market Economy

12. Market Economy It is all about the consumer and individual choice
As a consumer you make decisions based on you own economic interests.

13. Advantages of a Market Economy
High degree of individual freedom
Relatively small degree of government interference (Mixed Economy)
Seemingly unlimited variety of goods and services available to the consumers.

14. Disadvantages of a Market Economy
The government does not provide for the basic needs of everyone.
The government does not provide certain services that people value.

15. Which Economic System Are We?
Mixed Economy
Capitalism
Based on 4 Important Principles
- Private Property
- Freedom of Choice
- Profit
- Competition

16. Fundamentals of a Market Economy
Private property rights - rights of individuals and groups to own property.
Market – any place or situation in which people buy and sell resources and goods and services.
Property rights are enforced by law
Would this system work if buyers could not trust sellers?

17. Limited Government
Laissez faire – French term meaning “leave things along”.
Should the government leave the markets alone?
How does the government protect people from the market?

18. Voluntary Exchange
Two parties involved make an exchange usually a good or service for money.
This is guided by self interest

19. Consumer has the power A consumer can buy whatever they want.
This creates competition within a market
Self Interest – Both the buyer and seller use self interest to get what they want.

20. Specialization People do what they do best
A teacher can make money by teaching but how can he or she get groceries for the week.
Instead of growing them we go to the store with money earned by teaching and buy groceries.

21. Circular Flow Model

22. This shows how households and business meet in a market economy.

23. Product Market Market for goods and services
The suppliers of this market are businesses
The goods are sold for money (profit) which keep the businesses going

24. Factor Market
This market is where businesses go to get things for production
This means the factors of production.
We are included in this. We are the laborers, land owners, owners of capital.
We get income for doing this
Firms get resources from the product market which are used to produce goods.

25. Mixed Economy Most common economic system in the world.
It has elements of all three systems
In a mixed economy one of the three systems dominates and is the most prevalent in that economy.
The U.S. is a mixed economy, which of the three systems does the U.S. use the most?

26. How does the U.S. use each system?
Traditional
Command
Market

30. The free market has led to some interesting products!

31. What about other countries?

32. What’s the debate about Socialism?

33. Sweden Government pays for… Child care ages 1-5 School ages 6-16
More schooling and college if you want to go
Health care
Dental
Pensions
Time off for raising a family

34. Sweden How do they pay for this?
Citizens in Sweden pay about 60% of their income in taxes.

35. Politics of A Market Economy
Politicians need your vote
An almost endless amount of research goes into how people are likely to vote based on who they are, and how they live.
If the researchers do their job correctly they will know who you will vote for before you enter the booth.