Types of Economic Systems and The Three Economic Questions

Every economy has to answer these three questions…  What do we/I produce?  How do we/I produce it?  For whom do we/I product?  Each economy answers them in different ways.  Important vocabulary to know:  Consumers – people who buy, sell and trade items  Human goods – items made and sold

Traditional Economy  Based on customs and traditions.  Resources owned by inheritance.  Uses primitive methods and tools.  Hunting, Gathering, and Farming are still a major parts of the economy.  Bartering is used instead of currency. Countries with traditional economies:  African and South American tribes.

Traditional  What to produce?  Basic Needs  How to produce?  Through farming, artisans, gathering, hunting  For whom to produce?  Self, family, tribe

Command Economy  Government makes all major decisions about the economy.  Not based on competition (supply / demand) Countries with command economies:  Cuba, China, North Korea, Former USSR

Command  What to produce?  Needs of the country according to the government  How to produce?  Government planned production, industries, human goods (handmade items)  For whom to produce?  The government for the country and for trade

Market Economy  Consumers drive the economy by what they choose to buy.  Decisions based on buyers and sellers.  Competition (Supply/Demand) Examples:  United States, Mexico

Market  What to produce?  Wants and needs of the consumer  How to produce?  Human goods, industries, technologies  For whom to produce?  The people of the country and for trade

Mixed Economy  A blend of traditional, command, and market economies. Examples:  Almost all economies are a mixed economy.

Economies  Most economies are in between a command and market.  These are called mixed economies.  There are no pure command and market economies.

Economic Continuum  On page 19 of your Interactive Notebook draw the continuum. CommandMarket Mixed