economic systems. all economic systems organized ways of providing for wants and needs of a...
TRANSCRIPT
ECONOMIC SYSTEMS
ALL economic systems
• Organized ways of providing for wants and needs of a country’s people
• Answer the 3 basic economic questions
• Have to deal with SCARCITY of resources
• Have trade-offs
• Have opportunity costs
Four Economic Systems
• Traditional
• Market
• Command
• Mixed
Traditional Economic System• Economic questions answered based on
ritual, habit, or custom
• Individuals NOT free to decide
• Customs of elders and ancestors decide
• Examples: indigenous tribes in Africa, Australia, New Guinea, north Canada
• Advantages?
• Disadvantages?
Market Economic Systems
• What, how, for whom questions answered– By individuals and firms in marketplace
• Individuals are free to make decisions
• Producers make goods that consumers like
• Individuals’ incomes determine division of output (who gets what, how much)
• Private ownership and control of resources
• People depend on voluntary exchange
Considerations about Market Economies
• They CANNOT guarantee economic security and fairness – no equal distribution of $
• They depend on entrepreneurship– Entrepreneurs depend on government patents
• Unlike traditional economies, market economies adjust to consumer demands
• They provide efficient use of resources which leads to economic growth
Command Economic Systems• 3 economic decisions based on governmental
regulation
• Government owns means of production– Factories, utilities, transportation, etc.
• Little or no individual freedom or choice – Compared to market economy– Example: communist North Korea, Cuba
Considerations about Command Economies
• Can change direction in short time– Ex. USSR under Stalin
• Provide economic security services to people– Ex. Housing, jobs, food, healthcare
• Modern command economies have failed– MAIN reason: government decision-making led to
shortages and inefficiency
• LESS freedom and LESS efficiency than market economies
Communist Command Economies
• THEN: COLD WAR• Afghanistan, Albania,
Angola, Benin, Bulgaria, Cambodia, Congo, Czechoslovakia, East Germany, Ethiopia, Hungary, Mongolia, Mozambique, Poland, Romania, Somalia, South Yemen, Soviet Union, and Yugoslavia
• NOW• *China• Cuba• Laos• North Korea• *Vietnam
• *”Hybrid” countries: Communist government, increasingly market economy
Mixed Economic System
• MOST nations in the world today have mixed economies
• USA is a mixed economy – Government command elements?