Economic Systems Economic systems can be determined by who answers the 3 basic economic questions: What to produce? How to produce it? Whom to produce for?

Traditional Economy Ritual, habit, or customs decide how the economy works Whatever was done in the past is what you do now Ex: My parents were hunter-gatherers so I’ll be one too Pros: little to no uncertainty, life is stable and predictable, everybody knows what role to play Cons: tends to discourage new ideas, and lack of progress lowers the standard of living

Command Economy The government decides how to answer the basic economic questions. North Korea the last true Command Economy in the world Pros: whatever is needed will be produced, and no uncertainty of workers’ jobs Cons: economy based on needs and not wants, no incentive to work hard, and no reward for initiative slows progress

In what way is a traditional economy similar to a command economy? They both allow individuals to pursue whichever job they want Both show a sense of certainty for their career and future The three basic economic questions are answered through what they have done in the past Voting is essential to all in decision-making in both economies.

Market Economy Consumers decide the basic economic questions Dollars = votes Pros: High degree of individual freedom, low level of gov’t interference, a lot of choices Cons: only those with money can participate, does not provide for basic needs, high degree of uncertainty, greed (profit before people)

Mixed Economy A blend of traditional, market, and command Most economies in the world today are MIXED