Traditional, Market, Command, Mixed Economic Systems Traditional, Market, Command, Mixed

Why would people stand in line all day for one roll of toilet paper? Soviet Union—1980’s Why would people stand in line all day for one roll of toilet paper?

Economic Systems

Every society has an economic system in which people make and distribute goods and services.

WHAT IS AN ECONOMIC SYSTEM? An economic system describes how a society determines what to produce, how to produce, and for whom to distribute goods and services.

For whom will it be produced? In any type of economic system 3 basic questions must be answered. What will be produced? How will it be produced? For whom will it be produced?

THE 3 ECONOMIC SYSTEMS Traditional Command Market

TRADITIONAL ECONOMIC SYSTEM A traditional economic system is a community based system in which all factors of production rely on customs and beliefs. There is very little change. Trade is usually very limited. Today traditional economies are not common.

TRADITIONAL ECONOMIC SYSTEM What? Tradition, customs, and beliefs decide what goods and services will be produced. How? Tradition, customs, and beliefs decide how goods For Whom? For people who live in the community or the village.

COMMAND ECONOMIC SYSTEM In a command economy the factors of production is owned and controlled by the government.

COMMAND ECONOMIC SYSTEM What? The government decides what products are needed. How? Since the government owns all means of production, it decides how goods and services will be produced. For whom? The government decides who will get what is produced.

MARKET ECONOMIC SYSTEM In a market economic system the factor of production is controlled by individuals or corporations.

MARKET ECONOMIC SYSTEM What? Consumers and producers decide what should be produced. How? Consumers and producers decide how to produce. For whom? Consumers.

IMPORTANT! Traditional economies only make up a small part of a country’s economy. There are NO PURE Market economies in the world. There are NO PURE Command economies in the world. All economies in the world have aspects of both command and market.

THEREFORE… All modern economies in the world are MIXED economies. But the mix is different in every nation.

PURE COMMAND 0% PURE MARKET 100% USA 77% United Kingdom 76% Germany 74% Russia 51% PURE COMMAND 0% PURE MARKET 100% In which country do you think it would be the easiest to start a business?

75.8 73.8 51.1 Percentage of Market

IDENTIFY THE ECONOMIC SYSTEM For thousands of years, the Inuit parents have taught their children the survival skills needed to survive in the Arctic Circle’s severe climate. The children are taught to fish, hunt, and make effective tools. Once learned, these skills are passed down to the next generation. When the Inuit hunt, it is traditional for them to distribute the harvest with other families in the community.