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Economic Systems

  1. 1. Economic Systems
  2. 2. <ul><li>Traditional </li></ul><ul><li>Command </li></ul><ul><li>Market </li></ul>
  3. 3. Objectives <ul><li>Identify three questions that all economic systems must answer. </li></ul><ul><li>Describe a traditional economy </li></ul><ul><li>Describe a command economy </li></ul><ul><li>Describe a market economy </li></ul><ul><li>Explain how most economies have a mixed economy located on a continuum between a market and command economy </li></ul>
  4. 4. Vocabulary Break Economic System <ul><li>the system of production and distribution and consumption </li></ul>
  5. 5. Three Economic Questions <ul><li>What to produce? </li></ul><ul><li>How to produce? </li></ul><ul><li>For whom to produce? </li></ul>
  6. 6. Traditional <ul><li>A traditional economy is shaped largely by customs and religion. </li></ul><ul><li>Economic questions are answered by what happened in the past. </li></ul><ul><li>Traditional economies are mainly found in rural areas. </li></ul>
  7. 7. What to produce?-Traditional <ul><li>Just what is needed to take care of self </li></ul>
  8. 8. How to produce?-Traditional <ul><li>How it was produced in the past </li></ul>
  9. 9. For whom to produce?-Traditional <ul><li>Self and one’s household </li></ul>
  10. 10. Positives of a traditional economy <ul><li>Predictable </li></ul><ul><ul><li>Knowing what your job will be </li></ul></ul><ul><ul><li>Knowing the way you will live </li></ul></ul>
  11. 11. Problems with a traditional economy <ul><li>Lack many resources </li></ul><ul><li>Only produce enough to live on </li></ul>
  12. 12. Command <ul><li>In a command economy the government answers the three basic economic question </li></ul><ul><li>Sometimes called communism </li></ul>
  13. 13. What to produce?-Command <ul><li>What the government determines </li></ul>
  14. 14. How to produce?-Command <ul><li>Government says how to produce </li></ul>
  15. 15. For whom to produce?-Command <ul><li>Citizens regardless of market demand </li></ul>
  16. 16. Positives of a command economy <ul><li>Because the government makes the decisions, people don’t have to worry about employment, housing, education, and healthcare </li></ul>
  17. 17. Problems with a command economy <ul><li>Consumers get low priority </li></ul><ul><li>Little freedom of choice </li></ul><ul><li>All resources are owned by the government </li></ul>
  18. 18. Market <ul><li>In a market economy, buyers and sellers answer the three economic questions. </li></ul><ul><li>All resources are privately owned </li></ul>
  19. 19. What to produce?-Market <ul><li>Producers and consumers </li></ul><ul><li>Whatever the market demands that will produce a profit </li></ul>
  20. 20. How to produce?-Market <ul><ul><ul><ul><ul><li>By private producers </li></ul></ul></ul></ul></ul>
  21. 21. For whom to produce?-Market <ul><li>Consumers who demand the product and are willing to pay </li></ul>
  22. 22. Positives of a market economy <ul><li>People can start their own businesses </li></ul><ul><li>People have choice </li></ul>
  23. 23. Problems with a market economy <ul><li>The desire for money may lead to poor quality of goods and services </li></ul><ul><li>Business owners have to risk losing money </li></ul>
  24. 24. Vocabulary Break Continuum <ul><li>A continuous seamless series. </li></ul><ul><li>A link between things that gradually and seamlessly connects. It is impossible to say where one becomes the next. </li></ul>
  25. 25. Continuum of Economies Most Individual freedom No Individual freedom Pure Market Pure Command Most economies fall in between a pure market and a pure command economy on the continuum