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Economics 2 1
Economics 2 1
Economics 2 1
Economics 2 1
Economics 2 1
Economics 2 1
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Economics 2 1

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  • 1. Chapter 2 Economic Systems and Decision Making
  • 2. 2-1: Economic Systems
    • An economic system is an organized way in which society provides for the wants and needs of its people.
    • Traditional economy
      • – Allocations are based on ritual, habit, or custom.
      • Individuals generally are not free to make decisions based on what they want.
      • Roles are defined by customs.
  • 3.
    • Command economy
      • – A central authority makes all the major economic decisions.
      • Individual freedom is limited. Individuals are not free to make decisions based on what they want.
      • Private property rights are limited.
    • Market economy
      • – Individuals are free to make decisions in their own best interest.
      • Supply, demand, and the price system help people make economic decisions and allocate resources.
  • 4. Comparing Economic Systems
  • 5.
    • Most economies in the world today are some mix of traditional, command, and market economies.
    • Socialism is a political and economic system in which the government owns and controls some factors of production.
    • Communism is an extreme form of socialism in which all factors of production are collectively owned and controlled by the state.
    • The type of political system in a mixed economy is less important than the way basic economic decisions are made.
  • 6.
    • The Spectrum of Mixed Economies

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