2. TRADITIONAL ECONOMY
• Customs and habits of the past are used to
decide what and how goods will be produced,
distributed, and consumed.
• Jobs are handed down from generation to
generation- Parent to child.
• Very little change occurs over the generations
• The system can break down if some people are
not there to do their part.
• Primitive tools and methods are used (no
machinery).
• Farming, hunting and gathering, and cattle
herding are examples of a traditional economy
3. COMMAND ECONOMY
• Government planners make the decisions on which
goods and services to produce.
• Workers are told what to produce and how much
to produce within a period of time (quota).
• The wages earned by employees is set by the
government.
• The government does NOT always know what the
people need.
• People know how much things will cost.
• Food, clothing, and housing prices are kept low.
• Luxury items like computers and televisions are
priced high.
4. MARKET ECONOMY
• Known as capitalism and free enterprise
• Businesses and farms are owned by individuals or
corporations
• The law of supply and demand determines the
price that people pay for items
• Supply – the amount of goods available
• Demand – how many consumers want the goods
• A large supply with low demand = low prices
• A small supply with high demand = high prices
• Mexico is an example of a market economy
because individuals and corporations own MOST
of the businesses and farms
5. MIXED ECONOMY
• Most countries are MIXED economies.
• There are no true command or pure
market economies
• All economies are actually set on a
pendulum depending on how much the
government controls versus how much the
people/corporation controls.
COMMAND
MARKET
