Economic Systems

How about a quick field trip? Maybe a cruise would be fun.

Or not►I’m

afraid we’re all going to get to know each other a lot better.

What now?► We

know who will be in charge.

► But you guys will keep busy too!

Seriously though . . .

►We are going to have to put together an economy.

►What questions do we need to ask and answer.

3 Basic Economic Questions

►There are three questions that all economies have to answer.

What will we produce?

►What goods and services do we need? What would we like to have with the resources we have left?

How will we produce it?► What

technologies will we use and how will we organize production?

How will we distribute what is produced?

►Who gets what? This is the one that gets really tense sometimes.

We classify economies not by what the answers to the

questions are, but by who answers them.

►What are the possibilities?

The government can answer them.

► This is called a command economy, or sometimes a centrally planned economy.

► Communism is perhaps the most obvious example.

► Command economies are old though, like the tributary economy.

People can answer them for themselves.

►This is called a free market, or just market economy.

►We like to say our economy is a free market economy. Is it really?

There’s one other possibility.

►Dead people?!?►If we just do what we’ve always done,

we call it a traditional economy.

Most economies in the world today are really mixed

economies.

►These combine elements of command, market, and even traditional economies.

How is the US economy one that mixes elements of all three?

►However, we lean most heavily to a market economy, least to traditional.