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Economics 2 1


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Economics 2 1

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