Economic SystemsEconomic Systems

What is an economic What is an economic system? system? (1)(1)

An An economic system economic system is the way a nation uses its is the way a nation uses its resourcesresources to meet the needs of the people. to meet the needs of the people.

Huh!?

Each country uses an economic system to manage the financial welfare of their people. Think of an economic system as the way a

country does business

There are Four Basic Economic Systems:There are Four Basic Economic Systems:

TraditionalTraditional

CommandCommand

MarketMarket

MixedMixed

Can you guesswhich one the

U.S. has?

I’m not telling!You’ll just have to

wait & see!

All Economic SystemsAll Economic Systems must deal with must deal with

three questions . . . three questions . . .

WARNING! WARNING! WARNING!

THESE THREE QUESTIONS

WILL BE ON THE CRCT!

1. WHAT 1. WHAT goodsgoods will be will be produced? (2)produced? (2)

2. 2. HOWHOW will will goodsgoods be produced? (2) be produced? (2)

FishingManufacturingMiningFarming

3. 3. FOR FOR whomwhom shall goods be shall goods be producedproduced? ? (2)(2)

Economic Systems are named for how Economic Systems are named for how they deal with those three questions.they deal with those three questions.

TraditionalTraditional

CommandCommand

MarketMarket

MixedMixed

A. The government makes all decisions about A. The government makes all decisions about what to produce and takes command of the what to produce and takes command of the businesses.businesses.

B. Producers look at the market and make B. Producers look at the market and make decisions about what to produce based on decisions about what to produce based on what people want to buy.what people want to buy.

C. Customs and traditions make decisions C. Customs and traditions make decisions about what will be produced.about what will be produced.

D. A combination or mix of command and D. A combination or mix of command and market systems.market systems.

C.

A.

B.

D.

I. Traditional Economies . . .I. Traditional Economies . . .Are based on traditions and customsAre based on traditions and customs

Members usually share everythingMembers usually share everything

Rely on themselves for their needsRely on themselves for their needs

Generally depend on hunting & gatheringGenerally depend on hunting & gathering

Seldom seen in modern societySeldom seen in modern society

Examples . . .

II. Command EconomyII. Command Economy

The government decides what goods are madeThe government decides what goods are made

The government decides how they will be madeThe government decides how they will be made

The government decides how they will be soldThe government decides how they will be sold

The government decides the price for the goodsThe government decides the price for the goods

There are no pure command economies today, There are no pure command economies today, but a few come close . . . but a few come close . . .

ChinaNorth Korea

III. Market EconomyIII. Market EconomySometimes known as free market or free enterprise Sometimes known as free market or free enterprise The government plays little or no role in a market economyThe government plays little or no role in a market economyPeople are free to exchange goods and services without People are free to exchange goods and services without government interference or regulationsgovernment interference or regulationsIndividuals set prices without any government planningIndividuals set prices without any government planningAny person may start a business making or selling Any person may start a business making or selling whatever they wantwhatever they wantNo one is guaranteed success in a market economy, but No one is guaranteed success in a market economy, but anyone is free to tryanyone is free to tryThere are no countries with PURE market economies, but There are no countries with PURE market economies, but a few that come close are. . . a few that come close are. . .

CanadaMexico

IV. Mixed EconomyIV. Mixed Economy

Has elements of all the other three economiesHas elements of all the other three economies

Individual ownership is encouragedIndividual ownership is encouraged

The government does set some regulationsThe government does set some regulations

Sometimes referred to as a capitalist systemSometimes referred to as a capitalist system

Countries with mixed economies include . . . Countries with mixed economies include . . .

The United StatesThe U.K.

Pop Quiz!!Pop Quiz!!___ 1. traditional___ 1. traditional A. has a market economyA. has a market economy___ 2. command___ 2. command B. based on customsB. based on customs___ 3. market___ 3. market C. has a command economyC. has a command economy___ 4. mixed___ 4. mixed D. it’s all about the governmentD. it’s all about the government___ 5. Canada___ 5. Canada E. no government interferenceE. no government interference___ 6. UK___ 6. UK F. has a mixed market economyF. has a mixed market economy___ 7. North Korea___ 7. North Korea G. has elements of all four G. has elements of all four

8. Which system relies on itself for all its needs?8. Which system relies on itself for all its needs?9. In which system does the government play no part?9. In which system does the government play no part?10. What are the three questions all economic systems must answer?10. What are the three questions all economic systems must answer?

Yeah, baby!

Answers! Answers!

1. traditional1. traditional A. has a market economyA. has a market economy

2. command2. command B. based on customsB. based on customs

3. market3. market C. has a command economyC. has a command economy

4. mixed4. mixed D. it’s all about the D. it’s all about the governmentgovernment

5. Canada5. Canada E. no government interferenceE. no government interference

6. UK6. UK F. has a mixed market economyF. has a mixed market economy

7. North Korea7. North Korea G. has elements of all threeG. has elements of all three

B

D

EG

A

F

C

More AnswersMore Answers

8.Which system relies on itself for all its needs?8.Which system relies on itself for all its needs? Traditional. Traditional. (Native Americans did not shop at Wal-mart!)(Native Americans did not shop at Wal-mart!)

9. In which system does the government play no part?9. In which system does the government play no part? Market Market (Sometimes known as Free Enterprise)(Sometimes known as Free Enterprise)

10. What are the 3 questions all economic systems must answer?10. What are the 3 questions all economic systems must answer? What goods will be produced?What goods will be produced? How will they be produced?How will they be produced? For whom shall they be produced?For whom shall they be produced?

The End!The End!