Raw materials found in nature that are
used to produce goods
People’s knowledge, efforts, and skills
used in their work
Goods used to produce goods and
services (buildings, materials, and
Initiative to improve goods and services, or
create new ones
Nations use economic systems to determine how
to use their limited resources effectively.
1. Who decides what will be produced?
2. Who decides how it will be produced?
3. Who decides who will receive what is produced?
Where Are These Found?
In rural, under-developed countries
Examples: Pygmies of Congo, Native Americans, & the Amish
Economic activities are centered around the family or ethnic unit,
and customs govern the economic decisions that are made
Farming, hunting and gathering are done the same way as the
Advantages: people have specific roles; security in
the way things are done
Disadvantages: Technology is not used; difficult to improve
Also known as:
Free Market Economy, and Free Enterprise Economy
Businesses and consumers decide what they will
produce and purchase and in what quantities
Decisions on production and pricing are based on the law of
Supply and Demand
Advantage: competition to have the best products and
Disadvantage: huge gap between wealthy and poor
Note: a true market economy does not exist.
The government (or central authority) determines what,
how, and for whom goods and services are produced.
Strong Command: Government makes ALL decisions
Examples: North Korea, Cuba
Moderate Command: Some private enterprise exists, but the
government owns major resources.
Examples: France and Sweden
Combination of a market and a command economy
Government takes care of people’s Needs
Market takes care of people’s Wants
Most Nations have a mixed economy: Ex:
United States, England, and Australia
Advantages: Government meets the balance of wants and
needs in the market place
Disadvantages: Citizens have to pay taxes to fund government