1. ECONOMIC SYSTEMS How do we provide the wants and needs of society?

2. Economic systems An organized way of providing for the wants and needs of their people An organized way of providing for the wants and needs of their people We have 3 basic ways to answer this question We have 3 basic ways to answer this question Traditional EconomiesTraditional Economies Command EconomiesCommand Economies Market EconomiesMarket Economies

3. Traditional Economy Why do we leave tips at a restaurant? Why do we leave tips at a restaurant? Why do we eat Thanksgiving dinner? Why do we eat Thanksgiving dinner? Why do we shake hands with strangers? Why do we shake hands with strangers? Why does the bride toss the bouquet at a wedding? Why does the bride toss the bouquet at a wedding? …………………………………………. …………………………………………. TRADITION, roles and economic decisions are defined by custom. TRADITION, roles and economic decisions are defined by custom.

5. Traditional Economy Strengths Strengths Set economic roles for all members of the communitySet economic roles for all members of the community Stable, predictable, and continuous lifeStable, predictable, and continuous life Weaknesses Weaknesses Discourages new ideas Stagnation and lack of progress How would your life be different if you had grown up in a traditional economy?

6. Command Economy An economy in which a central authority makes most of the economic decisions. An economy in which a central authority makes most of the economic decisions. These are found today in………….These are found today in…………. North Korea North Korea Peoples Republic of China Peoples Republic of China Cuba Cuba Former Soviet Union Former Soviet Union

8. Command Economy Strengths Strengths Capable of dramatic change in a short timeCapable of dramatic change in a short time Health and public services available at little or no costsHealth and public services available at little or no costs EqualityEquality Weaknesses Weaknesses Does not meet wants and needs of consumers Lacks effective incentives for work Requires large bureacracy New and different ideas are discouraged

9. Command Economy In what ways are traditional and command economies alike? In what ways are traditional and command economies alike? In what ways are they different? In what ways are they different?

10. Market Economy People and firms act in their own best interest to answer the basic economic questions People and firms act in their own best interest to answer the basic economic questions People’s decisions act as “dollar votes”.People’s decisions act as “dollar votes”. Consumers answer the whatConsumers answer the what Ex. US, Canada, Japan, South Korea, Singapore, and parts of Western Europe. Ex. US, Canada, Japan, South Korea, Singapore, and parts of Western Europe.

12. Market Economy Strengths Strengths Can adjust to change graduallyCan adjust to change gradually Individual freedomIndividual freedom Notable lack of gov’t interferenceNotable lack of gov’t interference Decentralized decision makingDecentralized decision making Variety of goods and services = ConsumerVariety of goods and services = Consumer Weaknesses Weaknesses Rewards only productive resources Must guard against market failures

13. Exit Question In the early 1990s many Eastern European nations moved from a Command Economy to a Market Economy. What problems do you think they faced during the transition? In the early 1990s many Eastern European nations moved from a Command Economy to a Market Economy. What problems do you think they faced during the transition? How are the WHAT, HOW, and FOR WHOM answered in the 3 economic systems? How are the WHAT, HOW, and FOR WHOM answered in the 3 economic systems?