2. Any Economic System has to answer the 3 main
questions
What to produce?
How to produce?
For whom to produce?
3. Types of Pure Economic Systems
Traditional Economy
Command Economy
Market Economy
4. Traditional Economy
The three questions are answered through
tradition.( The past)
tradition determines what is produced
The production is made for social units such as
tribes
Still exist in some parts of the Americas and Africa.
5. Command Economy
This system relies on the government to answer the
three main economic questions.
Who plan everything in the government are called
the central planners.
Concerning economic choices normal individuals
have little or nothing to say.
Such system doesn't exist nowadays but existed in
the old Egyptian kingdom, Also in china a long
time ago.
6. Market Economy
Individual are the ones who answer the three
economic questions.
People can buy sell or produce what ever they
want.
The only form of control in such an economy is the
market.
7. Self Interest
This concept was introduced by Adam Smith
If the government was absent in the economy then
the markets will be driven by self interest.
While individuals worked to reach their own needs
there was an “ invisible hand” that made the people
do what was best for the society.
8. Incentives: is something that encourages you to
behave in a particular way
How is this concept linked to what we are studying
9. Mixed Economies
Since there isn't any pure economies nowadays, its
more becoming to be a mix and match for each
country.
These mixed economies are classified due to the
extent that the governments in these economies
intervene.
10. The three main types of mixed economies
Authoritarian Socialism
Capitalism
Democratic Socialism
11. Authoritarian Socialism
Closest to the command model
It is also called communism
Government nearly controls all factors of production
12. Capitalism
Closest to the market model.
Individuals who own the factors of production and
they answer the three economic questions.
Government's role is limited to
taxation, education, health and other public services.
13. Democratic Socialism
Falls between Authoritarian Socialism and Capitalism.
Government owns some of the factors of
production, most of the time are the things related to
national concern.
Individuals are able to influence economic planning
through elections of governments officials.
