2. Economic Systems
Goals:
- List the three economic questions that must be
answered by every society.
- Describe three types of economic systems.
- Identify 5 features of our market economy.
- Explain why economies are mixed systems.
- Explain why market economies are becoming
common around the world.
- Explain private property.
3. 2. Economic Systems – Key Terms:
- Business
- Capitalism
- Competition
- Custom-based economy
- Directed or planned economy
- Economic system
- Market Economy and Marketplace
- Private enterprise
- Profit
4. The three economic questions:
- What goods and services are to be
produced.
- How should the goods and services be
produced.
- For whom should the goods and services
be produced.
5. Countries are like people
The “what”
- They have unique wants and needs.
- Space travel
- Military
- Manufacturing
- Survival – basic needs
6. The “how”
- If many people and few capital resources
then heavy use of manual labor.
- If few people and large capital resources
then use of labor saving equipment.
7. The “for whom”
- Which wants and needs are most
critical?
- How will the goods and services be
distributed?
- Should they be shared equally?
- Should those who contribute more to
producing the goods and services get a
larger share?
8. In some economic systems …
You can buy whatever you want as
long as you have the money.
In others, it depends on the country’s
answers to the original questions.
9. Remember the original questions?
A country’s access to these is its
“Economic System”
There is no pure economy
10. Custom-based Economy
- In countries less developed, less
responsive to the global economy,
answers to economic questions are
determined by custom / tradition.
- Things are made the way they used
to be made.
11. Directed (Planned) Economy
- In some countries, answers come
from the owners of resources.
- Resources are owned and controlled
by the government.
- Agencies decide how much and
what will be spent on the military and
how much on consumer goods.
12. Market Economy
- Usually found in democracies.
- Questions are answered by the
individuals through buying and
selling activities in the marketplace.
- Marketplace is any place where
buyers and sellers exchange goods.
14. Capitalism
- Economic resources are usually
privately owned by individuals
rather than by the government.
- Individual owners are free to
decide what they will produce
with the resources.
15. Capitalism
- Because of this freedom of the
individual to choose that our
system is also known as:
“Free” or “Private Enterprise”
system.
16. Capitalism
- The right of “Private Property”.
This means that you can own, use,
or dispose of things of value by
selling them, giving them, or even
throwing them away.
