2.  Each economy has to answer three specific questions  How it answers these questions determines what kind of economy it is going to be.  The three questions are:  What is going to be produced?  How are we going to produce it?  For whom will it be produced?

3.  There are four types of economies  TRADITIONAL  FREE MARKET  COMMAND  MIXED

4.  A traditional economy is an economy where everyone does the same things their parents did, regardless of what they are good at.  Traditional economies produce everything needed for their own survival, but not much more.

5.  Several characteristics define a free market economy  Private ownership  Profit motive  Competition  Consumer Sovereignty  Choice  Little government involvement

6.  Centrally planned economy  Central control (government usually) of economic decisions  Little consumer choice  Cuba, North Korea, China are all command economies

7.  A combination of Command and Free-market  Individuals and businesses control the “Private Sector”  The government controls the “Public Sector”  There is more government control than a free market, but less than a command  Most modern countries (including the US) have a mixed economy.