This document discusses three basic economic systems - traditional, command, and market - and compares their characteristics. A traditional economy answers production questions based on rituals and customs, maintains stability but discourages new ideas. A command economy involves central government control over production decisions, providing stability but limiting innovation and consumer choice. A market economy allows individuals and businesses to make production decisions, prioritizing consumer choice, innovation and efficiency but providing less support for those unable to work.

1. Economic Systems Chapter 2

2. What will you learn today? Advantages and disadvantages of traditional, market, and command economies Characteristics of market, traditional, and command economies Economic system of another country

3. 3 Basic Questions What to Produce How to Produce 3. For Whom to Produce

4. Traditional Answer questions based on ritual or custom “ That’s the way we have always done it ville” Based on traditions of elders/ancestors

5. Traditional Examples What to Produce? Megalith/Stonehenge

6. Traditional Examples How to Produce? Ritual/pre-modern Japan

7. Traditional Example For Whom to Produce? Potlatch Guests/Northern Pacific Native Americans

8. Traditional Advantages Everyone knows their role Stable and predictable Disadvantages Discourages new ideas Stagnation Lower standard of living

9. Command Economy Central authority makes What, How, and For Whom decisions Government determines how resources are used “We Do What We’re Told Ville”

10. Command What to produce During the rule of Mao Zedong – Mao suit

11. Command How To Produce Manual Labor 1930s Canal between White and Baltic Seas Too narrow and shallow for ships

12. Command For Whom to Produce Ancient Egypt = King Tombs Wooden hammer and metal chisel to dig tomb into mountain

13. Command Advantages Little uncertainty about job Provide education, and healthcare at no cost, but minimal amounts Disadvantages Does not meet wants of consumer No incentive to work, just fill quota Requires large decision making bureaucracy Not flexible with day to day crisis No rewards for initiative

14. Market People and firms in their own best interests decide on the What, How, and For Whom Consumers not just producers decide what to produce

15. Market What to produce Beanie Babies!

16. Market How to Produce 1900s Henry Ford Assembly Line

17. Market For Whom to Produce Broad Market

18. Market Advantages Individual freedom Small degree of government interference Decentralized decision making Plethora of goods and services High degree of consumer satisfaction Disadvantages Rewards only productive resources: Does not provide for people too young, too old, or too sick Does not produce enough public goods High degree of uncertainty Market failures Competitive Adequate info Freely moving resources