Chapter 2.1 notes Types of Economies

What is an economy? economy or economic system – organized way of providing for the wants and needs of their people. Economies answer the what, how, for whom questions

Traditional Economies In a traditional economy, roles and economic decisions are defined by custom. Examples: African Mbuti, Aborigines and Inuits. Advantages – everyone knows which role to play and there is little uncertainty about what, how and for whom to produce. Disadvantages – discouragement of new ideas; leads to lower standard of living.

Command Economies one in which a central authority makes most of the what, how, and for whom decisions. Examples – N. Korea, Cuba, former Soviet Union

Market Economies producers and consumers determine what, how and for whom to produce. examples – U.S., Canada, S. Korea, Singapore, parts of western Europe.