In a PURE MARKET ECONOMY there is no government involvement in economic decisions. The government lets the market answer the three basic economic questions: 1. What? Consumers decide what should be produced in a market economy through the purchases they make. 2. How? Production is left entirely up to businesses. Businesses must be competitive in such an economy and produce quality products at lower prices than their competitors. 3. For whom? In a market economy, the people who have more money are able to buy more goods and services.

Capitalism features private ownership of businesses and marketplace competition. It is the same as a free enterprise system. The political system most frequently associated with capitalism is democracy.

In a PURE COMMAND ECONOMY there is complete government involvement in economic decisions. The government answers the three basic economic questions: 1. What? In a command economy, government officials decide what will be produced and in what amount. 2. How? Production is left entirely up to the government. The government owns the means of production. Businesses and property belong to the government. 3. For whom? In a command economy, the government decides for whom to produce without considering market demand. A command economy is designed to keep a few people from becoming rich while the rest of society struggles or winds up in poverty.

Communism is a pure command economy. In this system, land, property, and businesses are in the hands of the government. The state owns the factors of production, and government officials decide the answers to the basic economic questions.

Economic Systems There are no PURE market economies. There are no PURE command economies.

Mixed Economies Nearly all modern world economies have characteristics of both market and command economic system. They are called mixed economies.

Mixed Economy Mixed economies are not totally command or totally market. They have elements of both. However, some mixed economies lean more towards free markets and some tend to lean more toward command structures.

Mixed Economy The United States is not totally a market economy. It is a mixed economy. Example 1: The economy of the United States is based on private enterprise. However, some industries (for example, power companies and railroads in some areas) are under collective ownership.

Example 2: The United States government is involved in the economy through laws and regulations governing businesses, and it provides socialistic programs, such as welfare, Medicaid, and Medicare. Example 3: The government monitors how stocks are traded, outlaws monopolies, and will intervene if inflation gets out of control. HOWEVER, the United States government tries to let the market operate as freely as possible.

Mixed Economy China is not a totally command economy It is a mixed economy. It places strict controls on its economy, and many of the larger industries are owned by the state. In recent years, though, China’s desire to compete economically in the world has led it to allow some private ownership and business.

It is possible to look at economic systems along a continuum. Typically, the continuum runs from a Pure Command Economy to a Pure Market Economy.

On a continuum, from Pure Command Economy to Pure Market Economy, economic freedom runs from none to total.

On notebook paper, draw and label this continuum. Place the economy of the United States on your continuum. Place the economy of Cuba on your continuum. Place the economy of the People’s Republic of China on your continuum.

On this continuum, the economy of the United States would be placed closer to the right-hand side of the line than the left-hand side. China would be placed much closer to the left-hand side of the scale. Cuba would be placed closer to China than the United States. (Of course, the placements on the continuum could change if political or economic changes are made in these countries.)

As you can see, when studying different economic systems, it is good to view them on a continuum. Quick review: On this continuum where would you place the China? Cuba? Where do you think you should place Mexico?

Task: In a well-written paragraph, explain why the United States economy is placed where it is placed on this continuum.

Why the United States is placed where it is on this continuum Why the United States is placed where it is on this continuum? The economy of the United States is not a pure market but instead is a mixed economy leaning toward market. The United States has some market elements in the economy. The United States also has some elements of a traditional economic system . For example, goods are often exchanged or bartered at a flea market. The United States also has some command elements. For example, the U. S. government controls the production of some goods (like nuclear weapons) or decides who will get some goods (such as food stamps).