III. Economic Systems

Every single society has an economic system. The purpose of an economic system is to make and distribute goods and services. The roles of individuals, businesses, and government vary in each system. There are four basic economic systems: Traditional, Market, Command, and Mixed

Traditional Economies An economy where people make economic decisions based on their customs and habits. needs and wants are usually established through hunting and farming. This is usually the traditions of their ancestors Culture is seen as more important than having a strong economy

People in traditional economies usually do not want to change their basic way of life. In today’s world, traditional economies are not common

Market Economies An economy in which individual consumers and producers make economic decisions This type of economy is also called capitalism, or free market. Encourages people to start new businesses by giving them economic freedom

Command Economies In this form of government, the central government makes all economic decisions also called a centrally planned economy little or no economic freedoms for individuals producers and consumers make very few basic economic decisions

Mixed Economy In reality pure market or command economies do not exist most societies have mixed economies – different levels of government control combines different elements of traditional, market, and command economic systems

The United States has about the closest thing to a pure market economy However, it is still considered a mixed economy because of minor government regulations For example, the government passes laws to protect the rights of consumers The government also influences economic growth through jobs and services

Countries like North Korea have as close to a pure command economy as you can get, but are still considered mixed. The government controls almost all economic decisions.