What is an Economic System? Economic Systems What is an Economic System?

Roles within an economy Firms: Decide what to produce and who to hire. Households: Decide what to buy and who to work for. Markets: Place where goods and services are exchanged. Factors of Production: Land, labor, capital, and entrepreneurship.

Circular Flow

Economic Systems Economic System: They way a country manages and distributes resources. All countries have that circular flow, but how the flow specifically looks and the direction the flow takes may change.

Command Economy A system where the government determines what goods should be produced, how much should be produced and the price at which the goods will be offered for sale. -Examples?

Market Economy “A system of society-wide coordination of human activities not by central command but by mutual interactions in the form of transactions.” -Examples?

Supply & Demand Backbone of the Market Economy Supply = how much of a good or service is available Demand = how much of a good or service is wanted by consumers The market is driven by competition

Mixed Economy Government controls vital aspects of the economy. Consumers and producers agree on how much to produce in all other sectors. -Examples?

A New Nation You’re leader in a new nation. -Which economic system will you adopt? Why? -Fill in the circular flow diagram: which way will your flow go?