C2S1: Economic Systems Main Idea: An economic system is a set of rules that governs what goods and services to produce, how to produce them, and for whom they are produced.

C2S1: Economic Systems Key Terms: Economy Economic system Traditional Economy Command Economy Market Economy

C2S1: Economic Systems Traditional Economies Allocation of scarce resources stems from ritual, habit, or custom Examples Central African Mbuti Australian Aborigines North-Canadian Inuit

C2S1: Economic Systems Traditional Economies Advantages Disadvantages Everyone knows WHAT, HOW, and FOR WHOM because it is set by tradition Disadvantages Discourages new ideas Strict rules Lower standard of living

C2S1: Economic Systems Command Economies Decisions made by a central authority Examples North Korea Cuba The former Soviet Union

C2S1: Economic Systems Command Economies Advantages Disadvantages Economy can change direction quickly Disadvantages Does not meet wants of consumers No incentive to work hard Large bureaucracy

C2S1: Economic Systems Market Economies People and firms act in their own best interest to answer the 3 questions Examples United States Canada Great Britain

C2S1: Economic Systems Market Economies Advantages Disadvantages Can adjust to change High degree of individual freedom / lots of choices Little government interference Decisions made by many people / consumer satisfaction Disadvantages Does not provide for basic needs Few public services Possibility of failure

C2S1: Economic Systems Section 1 Assessment: Complete # 3 – 6 on page 39 in your notebook Show me when finished