Economic Systems Chapter 1 Section 3

What are the three Economic Resources? Bell Ringer What are the three Economic Resources?

Three Economic Questions 1.)What goods and services will be produced? 2.)How will the goods and services be produced? 3.)What needs and wants will be satisfied with the goods and services produced?

What to Produce? *Nations differ in the type and amount of resources *A nation will use its natural resources to determine what can be produced *Nations can also decide to trade

How to Produce *Nations must decide what combination of resources will best suit their needs *Economic resources can be combined in different ways to produce similar goods and services

Types of Economic Systems Economic System - The type of system is based on how much the government is involved in the marketplace *A nation’s plan for answering the three economic questions

Command Economy *Resources are owned and controlled by the government *Government decides what and how goods are produced *Government decides how goods will be distributed *Personal economic freedom is limited

Market Economy *Resources are owned and controlled by the people of the country *Economic questions are answered by individuals through buying and selling of goods and services in the marketplace *Marketplace is anywhere that goods and services exchange hands

Market Economy *No one directs consumers to make a particular purchase *The government has limited involvement *Consumers and businesses make decisions based on their own self interest *When consumers buy products they send a message

Traditional Economy *Goods and services are produced the way it has always been done *Used in countries that are less developed *Countries are not participating in the global market *Answers to the three economic questions are established by traditions *Countries consume most of what they produce and sell or trade the rest

Mixed Economies *Combines elements of the command and market economies *Most nations of the world can be classified as mixed *Soviet Union and China *As traditional economies develop the adopt mixed economies