The document outlines the advantages and disadvantages of four main economic systems: traditional, command/planned, free market, and mixed. Traditional systems have limited choices but low crime and environmental impact. Command economies have stable prices and meet basic needs but limit innovation and choice. Free markets foster innovation and competition but can be unequal and polluting. Mixed systems balance private enterprise and state provision of goods, with less environmental damage than other systems but potential for corruption.

1. ECONOMIC
SYSTEMS

2. OBJECTIVES
1. Outline the advantages of economic systems
2. Outline the disadvantages of economic systems

3. RECALL
• There are four basic types of economics systems:
• Traditional
• Command/planned
• Free market
• Mixed

4. TRADITIONAL

5. MERITS
1. The basic economic questions are already answered because
there is direct production, so people provide what they want.
2. Crime is relatively low since individuals focus on survival.

6. 3. There is very little environmental degradation.
Production methods are sustainable
Slash and burn techniques are used in
agriculture in some traditional
economies

7. DEMERITS
1. There are fewer choices for individuals because there is a limited
range of goods and services available.
2. Risk taking is are because failure can lead to starvation if crops
fail

8. 3. There is an inadequate use of skills relative to the resources
available, because skills are predetermined. For example the
daughter of a seamstress can have the innate abilities (good
recall, above average intelligence) that would enable her to b
a doctor. However, because of custom, she has to be a
seamstress.

9. COMMAND OR
PLANNED

10. MERITS
1. Government controlled prices do not fluctuate.
2. Vulnerable members of society (elderly, minorities) are cared
for.

11. 1. Basic needs of society are met.
2. There is no wasteful competition (like advertising) since the
state controls production

12. 1. There is limited choice for consumers.
2. There is little incentive for enterprise and innovation because
volume targets are set. There is no reward for producing extra.

13. 3. The environment may be degraded because in meeting
volume targets planners may not factor in damage to the
environment.
4. Planning may be inaccurate since it is difficult to forecast the
needs of the members of the society.

14. FREE MARKET

15. MERITS
1. Consumers have a wide range of choices since there are more
suppliers.
2. There is a strong incentive to innovate.

16. 3. There is a high level of competition.

17. DEMERITS
1. There is inequality of income with the haves and the have-
nots.
2. The wide range of choice is only available to those who can
afford it.

18. 3. Firms can influence prices by restricting output.
4. Since firms are driven by profit the level of environmental
degradation tends to be high.
Pollution in China

19. MIXED

20. MERITS
1. It ensures that citizens have a minimum standard of living.
2. Since resources are allocated by both the private and public
sector, it means that when the private sector fails to provide a
good or service, it is provided by the state.

21. 3. There is less environmental degradation than in the command
or free market economic systems. The state will intervene to
protect the environment for future generations.

22. DEMERITS
1. Corruption may damage relations between public and private
sectors.
2. Private sector may evade taxes and regulations.