Economic Systems

Objectives Students will be able to list and describe the five major economic systems.

Key Terms Economy Mixed Economy Pure Economy Market Economy Command Economy Capitalism Communism Socialism Privatization Transitional Economy Traditional Economy

Define Economy The organized way a nation provides for the needs and wants of its people.

Economic System Political philosophies that shape the world economies. Communism Socialism Capitalism

Three Economic Questions All economies must answer these three questions: What goods and services will be produced? How will they be produced? For whom will they be produced?

How are Economic Systems Categorized? Some standards that are used to distinguish between economic systems are: Who owns the resource? What decision making process is use to allocate resources and products? What types of incentives guide economic decision markets?

Is there such a things as a Pure Economy? Every economy has influences that make it at least somewhat mixed. How is the government involved in the U.S. economy? Bail out money, medical care

Mixed Economy All economies in the world today are mixed. The economic classification depends on how much a government interferes with the free market. There are three political philosophies that have shaped the worlds economies Capitalism Socialism Communism

The Three Most Prominent Economic Types Are: Capitalism Communism Socialism

Capitalism A.K.A. Market Economy This economy is characterized by marketplace competition and private ownership of businesses. Also called a Free Enterprise System Any income derived from selling resources goes exclusively to each resource owner Government in a capitalist society is concerned about the people and cares for those who cannot care for themselves. Democracy

Communism A.K.A. command economy. The government plays an authoritarian role in the economy The government controls the factors of production. No private ownership of property or capital. The theory behind communism is that is the government controls and owns everything everyone’s needs will be met and there will be no social classes! The government assigns jobs and there is no unemployment. Gov’t decides the type of schooling people receive, housing they will live in, medical care is free. Problem is there is no incentive for people to increase their productivity.

Socialism Main goal is to meet basic needs for all and to provide employment for many. The same idea as communism, a classless society Democratic political institutions. Differ from capitalism because of the increased amount of government involvement. Medical care is free Pay much higher taxes Government runs key industries and makes economic decisions

Other Economic Types While capitalism, communism, and socialism are the most prominent types there are two others. Transitional Economy Traditional Economy

Transitional Economy It involves converting state-owned enterprises into private enterprises—privatization. These economies are in transition (changing) from one system from another.

Traditional Economy A traditional economy is shaped largely by custom or religion (tradition). Family relations also play significant roles in economic activity. This type of economy ensures that every member of society has a purpose and as well, a participatory function in society.

Example of Economic Systems & Countries Capitalism/Market Economy – United States Communism/Command Economy - Cuba, Libya, Saudi Arabia, Iran, North Korea, and Burma Socialism- Canada, Germany and Sweden Transitional Economy - China and the former Soviet Union Traditional Economy - Brazil and Papa New Guinea.

Review Economies must answer the following: What goods and services will be produced? How will they be produced? For whom will they be produced? Five major economic systems are: Capitalism/Market Economy Communism/Command Economy Socialism Transitional Economy Traditional Economy

Review Con’t… Describe the three most prominent economic systems in the world? Capitalism Communism Socialism

Review Con’t… What are some countries with the following economic systems? Capitalism/Market Economy – United States Communism/Command Economy - Cuba, Libya, Saudi Arabia, Iran, North Korea, and Burma Socialism- Canada, Germany and Sweden Transitional Economy - China and the former Soviet Union Traditional Economy - Brazil and Papa New Guinea.