Three Types of Economies Ch. 13 Sec. 3 Pp. 363-369

Traditional Economies Basic economic decisions are made according to long-established patterns of behavior that are unlikely to change. Family is basic unit, but all members work together to support the society, not just their family Mainly in Central and South America, Africa, and Asia

Traditional Economies What to produce How to produce (traditional methods) Who gets what is produced (shares divided) Who owns the resources (usually small; few resources and goods needed)

Command Economies The government or a central authority owns or controls the factors of production and makes the basic economic decisions Government may set wages and decide who gets what job

Command Economies Central planning group makes most decisions about how, what, and how much to produce Consumers have little or no power to determine what is produced Central authority decides who gets what

Market Economies Private individuals own the factors of production and are free to make their own choices about production, distribution, and consumption Decisions take place in a bargaining process in the markets (place where buyers and sellers agree to exchange goods and services)

Market Economies The value of what you have to offer sets the value of what you can get Everyone takes part by freely making economic decisions You are free to decide how to use land, labor, and capital Major economic decisions about what and how much to produce and how to produce it are made by individuals

Market Economies Profit – difference between the cost of production and revenue Profit-seeking and competition is important in this type of economy Investing – using your own money to help a business start or grow

Market Economies Free enterprise – individuals in a market economy are free o undertake economic activities with little or no control from the government Capitalism – people make their own decisions about how to save resources as capital and how to use their capital to produce goods and services

Chairman of the Federal Reserve Modern-Day Economies Most countries today have an economy that is a mixture of the three basic types China became one in the 80s and 90s U.S. is considered a market economy, but there is some government control Ben Bernanke Chairman of the Federal Reserve