Economic Systems: How do economic systems answer the questions of what, how, and for whom to produce?

How a country makes the decision to distribute and produce its resources, along with who gets to have the resources determines...

its type of economic system.

An economic system in which economic decisions are based on customs and beliefs. People will make what they always made & will do the same work their parents did. Exchange of goods is done through bartering.

Traditional Ecomony

For whom to produce?

Who gets to have the goods and services?

In a command economy for whom are the goods and services produced?

Whoever the government decides to give them to

Bartering means...

trading without using money.

Strengths: People can start their own businesses, more choice Weaknesses: The desire for money may lead to poor quality of goods/services, business owners have to risk losing money

Market Economy

In a market economy, who decides what to produce?

Whatever the market demands that will produce a profit

A country must decide how to distribute its resources to...

meet the needs of its people.

An economic system is the way a society organizes the ________, _________, and ___________ of goods and services.

production, distribution, consumption

What to produce?

What kinds of goods and services should be produced?

How to produce?

What productive resources are used to produce goods and services?

There are 3 basic types of economic systems that have to answer three basic questions:

What to produce? How to produce? For whom to produce?

In a __________ economy, buyers and sellers answer the three economic questions.

Market

In a traditional economy, who decides for whom are the goods and services produced for?

Self and trading purposes (people in the village who need them)

Government makes all economic decisions &owns most of the property Sometimes called communism

Command Economy

Strengths: people do not have to worry about employment, housing, education, and healthcare Weaknesses: consumers own nothing, no choices/freedom, limited innovation by individuals

Command Economy

In a market economy, for whom are the goods and services produced?

Consumers who demand the product are are willing to pay

In a command economy who decides how to produce?

Government decides how to make goods/services

In a command economy who decides what to produce?

Government makes all economic decisions

Market Economy + Command Economy =

Mixed Economy

Mixed Economy

Most democratic countries fall in this category Examples: U.S., Brazil, Mexico, Canada, UK

In a traditional economy, who decides what to produce?

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

In a traditional economy, who decides how to produce goods and services?

People grow and make things the same way that their ancestors did.

In a market economy, who decides how to produce goods and services?

Private producers (businesses)

Examples: villages in Africa and South America; the Inuit tribes in Canada; the caste system in parts of rural India Strengths: Predictable job and lifestyle Weaknesses: Lack resources and limited production

Traditional Economy

Types of economic systems:

Traditional Economy Command Economy Market Economy