Economic Systems Mr. Kraus Economics

Why do we have Economic Systems? Scarcity Survival for any society depends on its ability to provide food, clothing, and shelter for its people. The Economic System is the organized way a society provides for the wants and needs of its people.

Three Economic Systems Traditional Economy Command Economy Market Economy

Economic Questions Traditional Economy Market Economy Command Economy What to Produce How to produce For whom to produce

Traditional Economy Economic activity is based on ritual, habit and custom

Strengths of Traditional Economies Everyone knows their role Little uncertainty over what to produce or how to produce The question of For Whom to produce is answered by custom Life is generally stable, predictable, and continuous

Weaknesses of Traditional Economies Tends to discourage new ideas Lack of progress leads to lower standard of living

Market Economy Markets allow buyers and sellers to come together in order to exchange goods and services

Market Economy People and firms act in their own best interest to answer economic questions

Strengths Markets can adjust over time Freedom exists for everyone involved Relatively small degree of governmental influence Decision making is decentralized Variety of goods and services are produced High degree of consumer satisfaction

Weaknesses The primary weakness is deciding for whom to produce The young, sick and old would have difficulty in a pure market environment Markets sometimes fail

Command Economy Central authority makes most economic decisions Economic decisions are made at the top and the people are expected to go along with choices their leaders make

Strengths of Command Economies Change direction drastically in a relatively short time

Weaknesses of Command Economy Not designed to meet the wants and needs of individuals Lack of incentives to work hard leads to unexpected results Large bureaucracy for economic planning Not flexible in dealing with minor day to day problems People with new or unique ideas are stifled

BRAINSTORM Which of theses systems best describe the economy of the United States?

Mixed Economy -No Economic System is purely Command or purely Market. -ALL economic systems use some combination of command and market features. LIKE A CONTINUUM

Example: North Korea Look for a few key elements –Government –Values –Standard of living –Answer the 3 economic questions

In pods Answer the 3 economic questions Decide which type of economic system best describes North Korea’s economy Discuss: Based on this video, how can you tell the type of economy North Korea has?

Example: India Look for a few key elements –Government –Values –Standard of living –Answer the 3 economic questions

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In Pods Answer the 3 economic questions Decide which type of economic system best describes India’s economy Discuss: Based on this video, how can you tell what type of economic system India has?

Now find your own! Choose 2 countries. Research those countries (as well as India and the U.S.) Things to think about: Government Standard of Living Values 3 Economic Questions Choose one of the countries you researchedIn 1 paragraph, tell me what country you have chosen, what are some of the values your country has, and what type of economic system has. Make a connection between the country’s values and the economic system.