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1. Write 3 things that you know about the word “Economy”

2. Write 2 things that you know about the word “System”

3. Write 1 thing that you know about the word “Resources”

On the Index Card

Economic Systems SS6E5 The student will analyze different economic systems. a.Compare different types of economic systems: traditional, market, command and mixed.1 – what to produce, 2 – how to produce, and 3- for whom to produce. b.b. Explain how most countries have a mixed economy located on a continuum between pure and market and pure command. c.c. Compare the basic types of economic systems found in United Kingdom, Germany, and Russia.

Essential Question

■ Write down this Essential Question: ■ How do traditional, command, and

market economies answer the economic questions of what to produce, how to produce, and for whom to produce?

What is Economics?■ Economics: Studies the choices of

people trying to satisfy their wants in a world of scarcity

Oil & fuel

Land

Doctors

Technology

WHAT ARE SOME THINGS YOU WANT THAT ARE SCARCE?

Economic QuestionsEconomic Systems determine three

questions: ■ WHAT goods will be produced? ■ HOW will the goods be produced? ■ FOR whom will the goods be produced?

The way a society answers these questions determines the economic system

What is an  ECONOMIC SYSTEM?

■ The way a society answers WHAT goods will be produced, HOW will the goods be produced, and FOR whom will the goods be produced

Economic Systems determine  three questions: 

▪ WHAT TO PRODUCE? (What kinds of goods and services should be produced?)

▪ HOW TO PRODUCE? (What productive resources are used to produce goods and services?)

▪ FOR WHOM TO PRODUCE? (Who gets to have the goods and services?

Influences of Economy Growth■ Economic Resources

■ Natural Resources – raw materials found in nature that are used to produce goods ■ What are examples of some NATURAL

RESOURCES? ■ Human Resources – people’s knowledge,

efforts, and skills used in their work ■ What are examples of some HUMAN

RESOURCES?

Influences of Economy Growth■ Economic Resources

■ Capital Resources – used to produce goods and services (buildings, materials, and equipment) ■ What are examples of some CAPITAL RESOURCES?

■ Entrepreneurial Resources - recognize the need for new goods or service ■ What are examples of some ENTREPRENEURIAL

RESOURCES?

■ Scarcity – shortage of resources

Why Economic Systems?■ Nations use economic systems to determine

how to use their limited resources effectively.

■ Primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.

3 Basic types of Economic Systems 

■ 1. Traditional Economy ■ 2. Market Economy (free enterprise) ■ 3. Command Economy ■ Mixed Economy - not considered an economy by

itself; just a blending of two different types of systems

Traditional Economy  The Old Way!

■ Found in rural, under-developed countries– ■ Inuits of Canada ■ Pygmies of Congo ■ Eskimos & Indian tribes ■ Belarus

Traditional Economy▪ Who decides what to produce?

▪ People follow their customs and make what their ancestors made

▪ Who decides how to produce goods & services? ▪ People grow & make things the same way that their

ancestors did ▪ Who are the goods & services produced

for? ▪ People in the village who need them

Traditional Economy  The Old Way!

■ Advantages: people have specific roles; security in the way things are done

■ Disadvantages: Technology is not used; difficult to improve

People will make what they always made & will do the same

work their parents did

Market Economy (Free Enterprise) – The Get Rich Way!

▪ Who decides what to produce? ▪ Businesses base decisions on supply and

demand and free enterprise (PRICE) ▪ Who decides how to produce goods

and services? ▪ Businesses decide how to produce goods

▪ Who are the goods and services produced for? ▪ consumers


■ Also called a Free Market Economy or Free Enterprise Economy

■ Businesses and consumers decide what they will produce and purchase and in what quantities

■ Decisions are made according to law of supply & demand

■ Supply and demand of goods and services determine what is produced and the price that will be charged.


■ Advantage—competition to have the best products and services

■ Disadvantage—huge rift between wealthy and poor

There are no truly pure Market economies, but the United States is close.

Command Economy –  The Government Way!

▪ Who decides what to produce? ▪ Government (central authority) makes all economic

decisions ▪ Who decides how to produce goods and

services? ▪ Government decides how to make goods/services

▪ Who are the goods and services produced for? ▪ Whoever the government decides to give them to


■ Strong Command – where government makes all decisions (communism – China, Cuba)

■ Moderate Command – where some form of private enterprise exists but the state owns major resources (socialism – France and Sweden)

Two types:

This system has not been very successful. More and more countries are abandoning it.


▪ Governmental planning groups determine such things as the prices of goods and services as well as the wages of workers


■ Advantages ■ Guarantees equal

standard of living for everyone

■ Less crime and poverty

■ Needs are provided for through the government

■ Disadvantages ■ Minimal choices ■ Fewer choices of

items ■ No incentive to

produce better product or engage in entrepreneurship

■ Also known as a Planned or Managed Economy

Mixed Economy – The Combined Way!■ Combination of a

market and a command economy

■ Most nations have a mixed economy: United States, England, Australia

■ Government takes care of people’s needs

■ Marketplace takes care of people’s wants

Mixed Economy – The Combined Way!

■ Advantage—balance of needs and wants met by government and in marketplace

■ Disadvantage—citizens have to pay taxes

Economic Continuum■ A line going from one extreme to the other extreme. ■ % is based on how much of the economic system is market vs

command. ■ The higher the percentage = more economic freedom and the

lower the percentage = less economic freedom ■ Where are countries on the economic continuum? U.K Germany 79% 71%

Russia O% 51% 100% PURE ______________________________________________ PURE COMMAND MARKET

Canada 81%

Brazil 57%

Cuba 28%

Index Card NAME!!

3- Basic Types of Economies 2- Examples of Mixed Economy

1-Define Economics

Ticket Out the Door

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