Economic SystemsEconomic Systems

►Economists have identified 3 Economists have identified 3 basic kinds of economic basic kinds of economic systems.systems.

►1. Traditional Economy1. Traditional Economy►2. Command Economy2. Command Economy►3. Market Economy3. Market Economy

Traditional Traditional EconomiesEconomies

►Economic decisions are made Economic decisions are made according to customs handed according to customs handed down from one generation to down from one generation to another.another.

►People supply the goods they People supply the goods they need by hunting, farming, need by hunting, farming, gathering, and making things gathering, and making things by hand.by hand.

Traditional Traditional EconomiesEconomies

Traditional economies are Traditional economies are untouched by technology.untouched by technology.

► TraditionalTraditional ► AdvancedAdvanced

In a traditional economy In a traditional economy economic activities center economic activities center

around the family.around the family.

Traditional Economies exist Traditional Economies exist primarily in rural, non-primarily in rural, non-industrialized areas.industrialized areas.

►They can be They can be found in found in parts of parts of Africa, South Africa, South America, America, Middle East, Middle East, and Asia.and Asia.

Command EconomyCommand Economy

►The Government makes all The Government makes all the economic decisions.the economic decisions.

►The government decides The government decides what to make, how many what to make, how many to make and how to make to make and how to make them.them.

The leaders direct the The leaders direct the command economy as they command economy as they

see fit.see fit.►Joseph Stalin of Joseph Stalin of

Russian and the Russian and the Soviet Union Soviet Union had a command had a command economy under economy under his communist his communist system.system.

The Government controls the The Government controls the means of Production and the means of Production and the

resources.resources.►The Individual The Individual

has little if has little if any influence any influence in economic in economic decisions.decisions.

Disadvantages of a Disadvantages of a command economycommand economy

►There is no competition! There is no competition! The factories do not The factories do not compete against each compete against each otherother..

►Consumers of no choice Consumers of no choice what to buy. Products are what to buy. Products are usually poorly made.usually poorly made.

Advantages of a Advantages of a command economycommand economy

►Government sets prices so Government sets prices so they can set low prices.they can set low prices.

►Only a few nations have Only a few nations have command economies since command economies since collapse of Soviet Union.collapse of Soviet Union.

Other Command Economy Other Command Economy Nations.Nations.

Only a few Only a few nations have nations have command command economies economies since since collapse of collapse of Soviet UnionSoviet Union..

►ChinaChina

►CubaCuba

►North KoreaNorth Korea

Governments with Command Governments with Command EconomiesEconomies

►Give there people free Give there people free health carehealth care

►Low cost housingLow cost housing►Free educationFree education►But these items are usually But these items are usually

low quality.low quality.

Market EconomiesMarket Economies

►ConsumersConsumers

make basic make basic economic economic decisions decisions according to according to principals of principals of supply and supply and demand.demand.

People are free to buy, sell and People are free to buy, sell and produce what ever they want.produce what ever they want.

►Individuals own the means of Individuals own the means of production.production.

►CapitalismCapitalism- an economic - an economic system in which individuals put system in which individuals put their money into a business in their money into a business in hopes of making a profit.hopes of making a profit.

ProfitProfit is the motive under is the motive under capitalism.capitalism.

►Free Enterprise-Free Enterprise- an an economic system in which economic system in which individuals are free to own individuals are free to own their own businesses, and their own businesses, and competition helps determine competition helps determine prices.prices.

Mixed EconomiesMixed Economies

►Economies that include Economies that include private ownership and private ownership and government guidance government guidance regulation.regulation.

►Individuals and the Individuals and the government share the government share the economic decision making economic decision making process.process.

Mixed EconomyMixed Economy

Most economies are Mixed.Most economies are Mixed.