The Economic Systems Objective: To cover the four types of economic systems
What is an Economic System? <ul><li>A way in which a nation uses its resources to satisfy its people’s needs and wants </l...
Three Basic Questions of Economics <ul><li>Nations like people have to make choices about what to produce </li></ul><ul><l...
Traditional System <ul><li>Is based on what was done in the past </li></ul><ul><li>Very primitive and simple </li></ul><ul...
Command Economy <ul><li>Government decides what is best for the people </li></ul><ul><li>Government controls land, labor, ...
Command Economy <ul><li>Advantage- is speed in which resources can be rerouted </li></ul><ul><li>Disadvantage- a lack of i...
Market Economy <ul><li>Is the opposite of a command economy  </li></ul><ul><li>Each person answers the three basic questio...
Mixed Economy <ul><li>Most nations today have a mixed economy </li></ul><ul><li>A mixed economy is one that is part comman...
Capitalism <ul><li>Is when the factors of production is mostly owned by the people and </li></ul><ul><li>Laissez-faire: “m...
Adam Smith <ul><li>Lived in Scotland over 200 years ago </li></ul><ul><li>Study market economies and wrote a book called “...
Market Economies  <ul><li>Freedom of Enterprise  means people are free to own the factors of production </li></ul><ul><li>...
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2 The Economic Systems

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2 The Economic Systems

  1. 1. The Economic Systems Objective: To cover the four types of economic systems
  2. 2. What is an Economic System? <ul><li>A way in which a nation uses its resources to satisfy its people’s needs and wants </li></ul>
  3. 3. Three Basic Questions of Economics <ul><li>Nations like people have to make choices about what to produce </li></ul><ul><li>They must answer three questions </li></ul><ul><li>What goods and services should be produced </li></ul><ul><li>How should these goods and services be produced </li></ul><ul><li>Who will get the goods and services </li></ul>
  4. 4. Traditional System <ul><li>Is based on what was done in the past </li></ul><ul><li>Very primitive and simple </li></ul><ul><li>Everyone shares equally in goods and services </li></ul><ul><li>Advantage is strong family ties </li></ul><ul><li>Disadvantage change is discouraged </li></ul>
  5. 5. Command Economy <ul><li>Government decides what is best for the people </li></ul><ul><li>Government controls land, labor, capital </li></ul><ul><li>Government decides who will work, where they will work, and what will be made </li></ul><ul><li>Finally government decides who will receive the goods and services </li></ul>
  6. 6. Command Economy <ul><li>Advantage- is speed in which resources can be rerouted </li></ul><ul><li>Disadvantage- a lack of incentive to work harder, a lack of consumer choice, and a lack of efficiency </li></ul>
  7. 7. Market Economy <ul><li>Is the opposite of a command economy </li></ul><ul><li>Each person answers the three basic questions for themselves </li></ul><ul><li>The most important part is that goods and services are bought and sold freely </li></ul><ul><li>The advantages are many, people have freedom, competition ensures there will be a variety of goods available at low prices </li></ul><ul><li>Disadvantage tends to over look the needs of very needy people </li></ul>
  8. 8. Mixed Economy <ul><li>Most nations today have a mixed economy </li></ul><ul><li>A mixed economy is one that is part command and part market economy </li></ul><ul><li>U.S.A. has a mixed economy </li></ul>
  9. 9. Capitalism <ul><li>Is when the factors of production is mostly owned by the people and </li></ul><ul><li>Laissez-faire: “means let people do what they choose” </li></ul><ul><li>Government has no role in business or very limited control </li></ul>
  10. 10. Adam Smith <ul><li>Lived in Scotland over 200 years ago </li></ul><ul><li>Study market economies and wrote a book called “Wealth of Nations” </li></ul><ul><li>Smith believed people made decisions based on self interest </li></ul><ul><li>Self interest is the invisible hand that controls market economies </li></ul>
  11. 11. Market Economies <ul><li>Freedom of Enterprise means people are free to own the factors of production </li></ul><ul><li>Freedom of Choice means buyers and sellers make decisions about what should be produced </li></ul><ul><li>Profit means you make money for yourself </li></ul><ul><li>Private property is an important incentive to motivate people to work </li></ul><ul><li>Competition (is a key factor) leads to an efficient use of resources and lower prices </li></ul>

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