1. Economic Systems McFarland

2. Types of Economic Systems Every country in the world must make economic choices in order to use their natural, human, and entrepreneurial resources efficiently.

3. Types of Economic Systems The leaders of each country must address the 3 basic economic questions – what, how, and for whom?

4. 4 Types of Economic Systems Traditional Command Market Mixed

5. What to Produce? Traditional –Determined by tradition –Economic roles passed from generation to generation Command –Determined by government officials Market –Determined by individuals

6. How to Produce? Traditional –Determined by custom Command –Determined by government officials Market –Determined by individuals

7. For Whom to Produce? Traditional –Usually centered around traditional family and social units such as tribes Command –Determined by government officials Market –Determined by individuals

8. Examples Traditional –Aborigines of Australia –Inuit of Canada Command –Middle Ages in Europe Market –U.S. –Canada

9. Mixed A mixed economy combines elements of all the other 3 economic systems

10. 3 Main Categories of Mixed Economies Communism – the government owns or controls nearly all the factors of production – leans towards the command model – ex. Cuba Capitalism – the individuals own the factors of production – leans toward the market model – ex. U.S. Socialism – the government owns some of the factors of production – ex. France

11. Features of the U.S. Economy Individuals in the U.S. are free to exchange their goods and services, seek jobs of their own choosing, use their resources as they wish, and own and operate businesses.

12. Features of the U.S. Economy Because of these freedoms, the capitalist economy of the U.S. is sometimes called a free enterprise system, a system under which business can be conducted freely with little government intervention.

13. Free-Enterprise Free-enterprise is based on 5 main features In the U.S. individuals have the right to…

14. 5 Main Features of Free-Enterprise Own private property and enter into contracts Make individual choices Engage in economic competition Make decisions based on self interest Participate in the economy with limited government involvement and regulation

15. Private Property Goods that are owned by individuals and by businesses, rather than by the government are considered private property Ex. Clothes, CD’s, books, factories, machinery, etc.

16. Contracts Individuals have the right to enter into agreements with one another to buy and sell goods and services These agreements are called contracts – ex. If John agreed to sell a CD to Jamie, they have a contract Contracts can be oral or written

17. Choice Property owns, laborers, producers, and consumers in the U.S. enjoy freedom of choice Ex. Producers are free to make whatever they wish

18. Competition Sometimes 2 or more people decide to make the same product or provide the same service This leads to competition, or the economic rivalry that exists among businesses selling the same or similar products The more competition there is, the lower the price of the product

19. Free-enterprise allows producers and consumers to make economic choices for their own benefit.

20. 6 Goals of U.S. Economy Freedom Efficiency Equity Security Stability Growth