Economic Systems Chapter 2 Section 1

3 Questions??? Econ System Questions: What, How & for whom should it be produced? Do you think it’s fair that some people have more than others, or should everyone share equally in what society produces?

Cont… Economic System: way in which a nation uses its resources to satisfy its people’s needs & wants. All nations, no matter how different, face the same 3 questions.

What Should Be Produced? If more of one particular item is produced, then less of something else will be produced. New roads means less money for parks. What auto types should be produced and how many.

How Should it be Produced? How many Laborers will be hired? Skilled or unskilled? Will capital goods be used to manufacture the product? What kind of technology will be needed? What combinations will be used to get the job done at the lowest cost?

For Whom Should it be Produced? Type of Econ System determines how goods & services will be distributed. U.S., most are distributed to individuals & businesses through a price system. Some other countries, through majority rules, lottery, first come…, sharing =, military force.

Types of Systems 4 basic econ systems: traditional, command, market & mixed. No ‘PURE’ systems exist. TRADITIONAL SYSTEM: the way it has always been done. Decisions based on customs & beliefs, often religious, handed down for generations. In this system, parents would teach you to perform the same tasks they learned. The way it has always been done.

Cont… Advantage: you know what is expected of you. Family & community ties are very strong. Disadvantage: economy that change is discouraged & perhaps even punished, & which methods of production are often inefficient. Choices of goods are rare. Status stays the same. Limited parts of the world: Inuit, Mbuti in Congo, Aborigines of Aus. Are part of this system.

Command System