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

The Three Basic Economic Systems Traditional Command Market  Traditional - People do the same work as their parents; bartering is common.  Command - The government decides how to answer the 3 economic questions  Market - Individuals decide how to answer the 3 economic questions

 A mixed economic system is not really a separate type of economic system. It is simply a mix of command and market.  Most world economies are not completely market or command. Instead they are mixed.  Countries with mixed economies are on a continuum between pure market and pure command.

1) What to produce?  40% of the Chinese economy is still based in industries run by the government.  60% of its economy is based on the private sector where producers and consumers make their own production decisions.

2) How to produce?  Government (state)-run industries are very inefficient, especially in agriculture. This limits China’s economic growth.  In the private sector, economic growth is happening so quickly that Chinese officials are having difficulty controlling consumer safety and environmental pollution.

3) For whom to produce?  Food must first be produced to meet its peoples’ needs and only the surplus can be exported. However, there is not enough to meet the peoples’ needs.  China exports large amounts of manufactured goods. However, both Chinese and foreign companies are looking at China’s ever- increasing middle class as a growth market.

Command_________X______Market

1) What to produce?  Most Indians rely on subsistence farming to survive.  Since 1991, India has slowly allowed both Indian and foreign businesses to operate.  There is a lot of corruption and bureaucracy involved in starting and running a business.

2) How to produce?  India has an increasingly well-educated workforce, especially in engineering and computer science.  India is trying to do better at protecting intellectual and private property rights.  It is difficult to operate a business in India because of the corruption and heavy taxes.

3) For whom to produce?  Food production is mostly for its own citizens.  Indian software companies are increasingly marketing their services to other countries.

Command__________________X_____Market

1) What to produce?  Japan’s economy is a market economy is which supply and demand determine what will be produced.  The few industries that are government- controlled (such as agriculture), have lower productivity than private-run businesses.

2) How to produce?  Private businesses determine their own production processes.

3) For whom to produce?  The Japanese enjoy a high standard of living and create a strong domestic market for goods and services.  Because Japan’s industries are known for their efficiency and quality, it has become a major exporter in the world.

Command_____________________X__Market

1) What to produce? TThe majority of economic activities are centrally controlled by the government. DDue to natural disaster and inefficient government-run industries, North Korea receives a large amount of food from charities and foreign countries, such as the United States. TThere is an underground economy that runs like a market-based system.

2) How to produce?  All production decisions and methods are determined by the government.

3) For whom to produce?  About 25% of the economy is for maintaining the military. This limits the amount of goods and services available to the rest of the people.  North Korea does produce natural resources and manufactured goods for export.

Command_X______________________Market