Transcript Economic System

Economic Systems
The way a group of
people produce and
distribute goods and
services.
4 Types
of Economic Systems
1.
2.
3.
4.
Command
Traditional
Market
Mixed
Traditional Economy
Definition
When people grow or make their own goods
Characteristics
•Found in developing countries
•Use of Barter System (Trade goods for goods)
•Production & Distribution of goods/services is based on
customs and traditions of society.
•Based on how things were done in the past.
Examples
Found in remote Rural areas (Congo/Amish)
Found in many developing countries
Command ECONOMY
•Definition:
•Gov’t makes all economic decisions
and controls everything
•Characteristics:
•No competition
•Government determines
•For Whom, how and what products will be
made
•Prices of products
•People are not free to choose what to buy or
sell
Command EConomY Con’t
• Examples:
Communism – economic system in
which the central government directs all
major economic decisions.
Socialism – Government has some
controls over basic means of production
the rest are privately owned and
operated.
Command EConomY Con’t
• Role of Government
Make all decisions about what is
produced and who gets it
Market ECONOMY
•Definition:
•People are free to obtain goods and services in any way
they want
•Characteristics:
•Competition exists
•NO Government Interference (Laissez-Faire)
•Consumers are NOT protected by unfair business practices such as
monopolies.
•Goods are produced to meet public demand (supply & demand).
•Private businesses produce goods for profit
markEt EConomY Con’t
• Examples:
Capitalism– Economic decisions for
production are made by people and are
based on profit motive.
No current nation has a true market
economy
markEt EConomY Con’t
• Role of Government
In a true market economy, Government
has very little or no involvement; it does
not regulate business, nor does it
protect consumers
Mixed ECONOMY
•Definition:
•Relies on a combination of all the other three economic
systems
•Characteristics:
•People CHOOSE what they buy and sell.
•Competition is encouraged.
•Government regulates business to protect consumers
•Supply & demand dictate what are produced
•Sellers motivated by profit
mIXEd EConomY Con’t
Examples:
Capitalism
United States
Most of the countries in the world have
some sort of mixed economy
mIXEd EConomY Con’t
Role of Government
In a mixed economy, Government sets
up regulations in order to protect
consumers (break up monopolies;
establish minimum wage; create laws to
limit pollution, etc…)