Economic SystemsAdvantages & Disadvantages

Traditional Economy - Advantages

There is little to no uncertainty

Everyone knows what role to play

Life is generally stable, predictable, and continuous

Security in the way things are done

Traditional Economy - Disadvantages

Tend to discourage new ideas and new ways of doing things

Lack of progress lowers standard of living

Technology is not used; difficult to improve

Lack of individual choice/freedoms

Command Economy - Advantages

Economies can change rapidly on government command

Whatever is needed most will be produced

No uncertainty (people are told when and how to work)

Free education, health care, and other public services

Command Economy - Disadvantages

Economy designed to meet needs, not wants

No incentive to work hard as people rarely lose their job

No reward for initiative, which slows progress

Pure Market Economy - Advantages

Adjusts to change based on consumer wants

High degree of individual freedom

Low levels of government interference

Anyone with money has a voice in the economy

Wide variety of available goods & services available

Competition in the market leads to better products

Pure Market Economy - Disadvantages

Poverty: only those with money can participate

Market does not provide for people’s basic needs.

High degree of uncertainty: people lose jobs; businesses fail

Puts profit before people

Rift between wealthy and poor

Typically becomes anarchy

Mixed Economy - Advantages

Government can decide how involved, or uninvolved, they wish to be to best serve their people

Government can provide the needs for their people while the people provide for their own wants

Mixed Economy - Disadvantages

Disadvantages depend on the country

Economic Systems& the Mixed Economy Continuum

Mixed EconomyThe Continuum

Mixed EconomyWhat do we know about these economies?

Israel - What to produce?

A large portion of Israel’s GDP (Gross Domestic Product) comes from high tech manufacturing, financial services, and agriculture

Israel - How to produce?

Israel has substantial (a lot of ) government ownership of business, but is gradually privatizing (people own) companies

Israel - For whom to produce?

The private sector produces goods and services for domestic and international markets based on the market price system

Where does Israel fall on the continuum?

Israel - 68%Israel would fall in the middle of the market side

Saudi Arabia - What to produce?

Saudi Arabia is the world ’s leading producer of oil

The Saudi government continues to invest in industrial production

Leaders in petrochemicals, mining, and refining

Saudi Arabia - How to produce?

95% of oil production is controlled by the government

Relies heavily on specialized labor from other countries (1/3 of labor force)

Since 1980s, has been trying to increase private & foreign ownership

Saudi Arabia - For whom to produce?

1/3 of GDP is based on exports

This is due to the economy’s reliance on the oil sector

Where does Saudi Arabia fall on the continuum?

Saudi Arabia - 64%Saudi Arabia would fall to the left of Israel on the continuum

Turkey - What to produce?

Turkey has a diversified economy with large service, manufacturing, and agricultural sectors

Turkey - How to produce?

Since the 1980s, gradually moved towards more private enterprise

Turkey - For whom to produce?

1/5 of Turkey’s production is exported

Remainder consumed by domestic consumers and the government

Where does Turkey fall on the continuum?

Turkey - 62%Turkey would fall to the left of Saudi Arabia and Israel