Mr. Rosenstock Learned how to close a zip-loc bag two years ago Economic Systems

Economic Systems All societies have to deal with scarcity. All societies have an economy or economic system: an organized way of providing for the wants and needs of their people. There are three main types of economic systems: Traditional Command Market

Traditional In a society with a traditional economy, the way resources are allocated, and how wants and needs are satisfied stem from culture, habit and ritual. Cultures with traditional economies include the Inuit in the far north of Canada, the Aborigines in Australia and the Amish in the United States. In these cultures, people have specific roles to perform: some are hunters or farmers, others are weavers, etc. These roles are passed down from parent to child. Advantages: Everyone knows what role they have, so they know what to produce. Everyone knows how to produce because they were taught from their parents. Everyone knows for whom they produce as this is due to custom and ritual.

Disadvantages: New ideas are usually discouraged. Lack of progress leads to a lower standard of living. People who defy the community are discouraged/ threaten the way of life.

Command: In a command economy a central authority makes the decisions about what, how and for whom goods and services are produced. Current examples include: China, Cuba and North Korea. Advantages: The main advantage is that changes can be made quickly in a command economy. An example would be the former Soviet Union which went from rural to a leading industrial nation in a few decades by emphasizing heavy industry and industrial growth. Groups such as the very young, old and disabled often cared for by the state. Resources can be directed to specific needs more quickly because of government control. People don’t usually lose their jobs in a command economy

Disadvantages: Command economies tend to be slow to make minor adjustments because often there is a bureaucracy that makes the decisions. They also tend not to meet the demands of consumers very well. Not as many choices for consumers in a command economy. There isn’t often any incentive to work well and people with varying skills often receive the same wages.

Market: In a market economy individual people and businesses make the decisions about what, how and for whom to produce. Examples include the United States, Western Europe, Mexico, much of Central and South America, and Asia. Advantages: Individual freedom is the main strength of a market economy. Additionally market economies usually adjust to small things well. Governments tend not to interfere with the economy much. There usually is a greater variety of goods and services available. People earn what they are able to command. Individuals are more important in a market economy.

Disadvantages: Market economies don’t always meet the needs of everyone. The very young, old and sick can easily be lost in a market economy . Workers and businesses face uncertainty over jobs and whether they will stay in business. Finally if markets aren’t free, then some businesses or individuals can become too powerful and force out smaller businesses.