Economic Economic SystemsSystems

Economic SystemsEconomic Systems

Countries must decide how to Countries must decide how to distribute its resources to meet the distribute its resources to meet the

needs of its people.needs of its people.

Countries do this through an Countries do this through an economic system.economic system.

Economic SystemsEconomic Systems

An Economic System is the An Economic System is the way a society organizes the way a society organizes the productionproduction, , distributiondistribution, and , and consumptionconsumption of good and of good and

services.services.

VocabularVocabularyy

BreakBreakIn small groups, sort the pictures

provided as examples of production, distribution, or consumption

Economic SystemsEconomic SystemsThere are 3 basic types of There are 3 basic types of

economic systems that have to economic systems that have to answer three basic questions:answer three basic questions:

(1)(1)What to produce?What to produce?

(2)(2)How to produce?How to produce?

(3)(3)For Whom to produce?For Whom to produce?

Economic SystemsEconomic Systems WHAT TO PRODUCE? WHAT TO PRODUCE? (What kinds of goods and (What kinds of goods and

services should be produced?)services should be produced?)

HOW TO PRODUCE? HOW TO PRODUCE? (What productive resources (What productive resources are used to produce goods and services?)are used to produce goods and services?)

FOR WHOM TO PRODUCE? FOR WHOM TO PRODUCE? (Who gets to have the (Who gets to have the goods and services?goods and services?

The way a society answers these questions The way a society answers these questions determines its economic system.determines its economic system.

Types of Economic Types of Economic Systems:Systems:

1. Traditional Economy1. Traditional Economy

2. Command Economy2. Command Economy

3. Market Economy3. Market Economy

Economic SystemsEconomic SystemsFoldableFoldable

Follow teacher instructions to Follow teacher instructions to create your Economic Systems create your Economic Systems Foldable to use for note-takingFoldable to use for note-taking

Traditional EconomyTraditional Economy An economic system in which economic An economic system in which economic

decisions are based on customs and decisions are based on customs and beliefsbeliefs

People will make what they always made People will make what they always made & will do the same work their parents did& will do the same work their parents did

Exchange of goods is done through Exchange of goods is done through Bartering: trading without using moneyBartering: trading without using money

Traditional EconomyTraditional Economy Who decides Who decides what to producewhat to produce??

People follow their customs and make only People follow their customs and make only what is needed to take care of oneselfwhat is needed to take care of oneself

Who decides Who decides how to producehow to produce goods & goods & services?services? People grow & make things the same way People grow & make things the same way

that their ancestors didthat their ancestors did

For WhomFor Whom are the goods & services are the goods & services produced for?produced for? Self and trading purposes (people Self and trading purposes (people

in the village who need them)in the village who need them)

Traditional Economy Traditional Economy Examples:Examples:

Villages in Africa and South America; the Villages in Africa and South America; the Inuit tribes in Canada; the caste system in Inuit tribes in Canada; the caste system in parts of rural Indiaparts of rural India

Strengths: Predictable job and lifestyleStrengths: Predictable job and lifestyle Weaknesses: Lack resources and limited Weaknesses: Lack resources and limited

productionproduction

Distributed Distributed SummarizingSummarizing

Draw an illustration in Draw an illustration in your foldable that your foldable that

represents a Traditional represents a Traditional Economy.Economy.

Command EconomyCommand Economy Government makes all economic Government makes all economic

decisions & owns most of the propertydecisions & owns most of the property Sometimes called communismSometimes called communism Examples: Cuba, former Soviet Union, Examples: Cuba, former Soviet Union,

North KoreaNorth Korea This system has not been very successful This system has not been very successful

& more and more countries are & more and more countries are abandoning itabandoning it

Command EconomyCommand Economy Who decides Who decides what to producewhat to produce??

Government makes all economic decisionsGovernment makes all economic decisions

Who decides Who decides how to producehow to produce goods and goods and services?services? Government decides how to make Government decides how to make

goods/servicesgoods/services

For WhomFor Whom are the goods and are the goods and services produced for?services produced for? Whoever the government decides to give them toWhoever the government decides to give them to

Command EconomyCommand Economy Strengths: people do not have to Strengths: people do not have to

worry about employment, housing, worry about employment, housing, education, and healthcareeducation, and healthcare

Weaknesses: consumers own Weaknesses: consumers own nothing, no choices/freedom, limited nothing, no choices/freedom, limited innovation by individualsinnovation by individuals

Distributed Distributed SummarizingSummarizing

Draw an illustration in Draw an illustration in your foldable that your foldable that

represents a Command represents a Command Economy.Economy.

Market EconomyMarket Economy In a market economy, buyers and sellers answer In a market economy, buyers and sellers answer

the three economic questionsthe three economic questions All resources are privately ownedAll resources are privately owned Who decides Who decides what to producewhat to produce??

Whatever the market demands that will produce Whatever the market demands that will produce a profita profit

Who decides Who decides how to producehow to produce goods and goods and services?services? Private producers (businesses)Private producers (businesses)

For WhomFor Whom are the goods and services are the goods and services produced for?produced for? Consumers who demand the product and are Consumers who demand the product and are

willing to paywilling to pay

Market EconomyMarket Economy

Strengths: People can start their Strengths: People can start their own businesses, more choiceown businesses, more choice

Weaknesses: The desire for money Weaknesses: The desire for money may lead to poor quality of goods may lead to poor quality of goods and services, business owners have and services, business owners have to risk losing moneyto risk losing money

Distributed Distributed SummarizingSummarizing

Draw an illustration in Draw an illustration in your foldable that your foldable that

represents a Market represents a Market Economy.Economy.

Distributed Summarizing:Distributed Summarizing:

Economic Economic System QuotesSystem Quotes

Mixed EconomyMixed Economy Market + Command = MixedMarket + Command = Mixed There are no pure command or market economies. There are no pure command or market economies.

To some degree, all modern economies show To some degree, all modern economies show characteristics of both systems and are often characteristics of both systems and are often referred to as referred to as mixedmixed economies. economies. Most economies are closer to one type of Most economies are closer to one type of

economic system than anothereconomic system than another For example, businesses own resources and For example, businesses own resources and

determine what and how to produce, but the determine what and how to produce, but the Government regulates certain industriesGovernment regulates certain industries

Mixed EconomyMixed Economy Most democratic countries fall in this Most democratic countries fall in this

category (there are no truly pure Market category (there are no truly pure Market or Command economies).or Command economies).

Examples: U.S., Brazil, Mexico, Canada, Examples: U.S., Brazil, Mexico, Canada, UK, etc.UK, etc.

Continuum of Economies

Mixed

Pure Market

Pure Command

Distributed Distributed SummarizingSummarizing

In small groups, In small groups, complete the complete the

Economic Systems Economic Systems Continuum ActivityContinuum Activity

SummarizingSummarizingStrategyStrategy

On a sheet of paper, write On a sheet of paper, write down in which Economic down in which Economic System you would prefer System you would prefer

to live and why.to live and why.

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