Types of Economic Systems

andThe Three Economic

Questions

Every economy has to answer these three questions…

What do we/I produce? How do we/I produce it? For whom do we/I product?

Each economy answers them in different ways.

Important vocabulary to know: Consumers – people who buy, sell and trade

items Human goods – items made and sold

Traditional Economy

Based on customs and traditions. Resources owned by inheritance. Uses primitive methods and

tools. Hunting, Gathering, and Farming

are still a major parts of the economy.

Bartering is used instead of currency.

Countries with traditional economies:

African and South American tribes.

Traditional

What to produce?Basic Needs

How to produce?Through farming, artisans,

gathering, hunting For whom to produce?

Self, family, tribe

Command Economy

Government makes all major decisions about the economy.

Not based on competition (supply / demand)

Countries with command economies:

Cuba, China, North Korea, Former USSR

Command

What to produce? Needs of the country according to

the government How to produce?

Government planned production, industries, human goods (handmade items)

For whom to produce? The government for the country and

for trade

Market Economy

Consumers drive the economy by what they choose to buy.

Decisions based on buyers and sellers.

Competition (Supply/Demand)

Examples: United States, Mexico

Market

What to produce?Wants and needs of the

consumer How to produce?Human goods, industries,

technologies For whom to produce?

The people of the country and for trade

Mixed Economy A blend of

traditional, command, and market economies.

Examples: Almost all

economies are a mixed economy.

Economies

Most economies are in between a command and market.

These are called mixed economies.

There are no pure command and market economies.

Economic Continuum On page 19 of your Interactive Notebook draw the continuum.

Command Market

Mixed