Economic Systems SSEF4

Why Economic Systems? Nations use economic systems to determine how to use their limited resources effectively Primary goal of an economic system is to provide people with a minimum standard of living or quality of life

Types of Economic Systems Traditional Economy Market Economy (free enterprise) Command Economy Mixed Economy

Traditional Economy Found in rural, underdeveloped countries Vanuatu Pygmies of Congo Eskimos & Indian tribes Belarus INUIT AMISH Customs govern the economic decisions that are made Farming, hunting and gathering are done the same way as the generation before

Traditional Economy Men and women are given different economic roles and tasks Advantages: people have specific roles; security in the way things are done Disadvantages: Technology is not used; difficult to improve

Market Economy Also known as Free Market Economy Free Enterprise Economy Businesses and consumers decide what they will produce and purchase and in what quantities Decisions are made according to law off supply & demand Supply and demand of goods and services determine what is produced and the price that will be charged.

Market Economy (Free Enterprise) Advantage—competition to have the best products and services Disadvantage— huge rift between wealthy and poor Note: a true market economy does not exist…

Also known as a Planned or Managed Economy Command Economy The government (or central authority) determines what, how, and for whom goods and services are produced. Also known as a Planned or Managed Economy

Command Economy Examples

Also known as a Planned or Managed Economy Command Economy Advantages Guarantees equal standard of living for everyone Less crime and poverty Needs are provided for through the government Disadvantages Minimal choices Fewer choices off items No incentive to produce a better product or engage in entrepreneurship Also known as a Planned or Managed Economy

Economic Systems: There are no PURE command economies There are no PURE market economies Instead there is a continuum of different characteristics

All economic systems are Mixed Systems TYPE OF SYSTEM WHO OWNS? WHO DECIDES? Pure Capitalism: private ownership the market system Command Economy: government ownership centralized (or gov't) decision-making Mixed Economy some private and some government  

All over the world countries are changing their economies from command economies to market economies

Mixed Economy Combination of a market and a command economy Government takes care of people’s needs Marketplace takes care of people’s wants Most nations have a mixed economy United States, Australia, England,

Mixed Economy Advantage balance off needs and wants met by government and in marketplace Disadvantage Citizens have to pay taxes