Economic Systems Economics Book Chapter 2 (p ) (p ) Pages to read p , 29-31, © Judith Schieszer for use in Shawnee Mission School © NCEE Virtualeconomics

Economic Systems Economic systems can be categorized according to who makes most of the decisions in an economy. Economic systems can be categorized according to who makes most of the decisions in an economy.

The institutional framework of formal and informal rules that a society uses to determine: The institutional framework of formal and informal rules that a society uses to determine: What should be produced? What should be produced? How should it be produced? How should it be produced? For whom should it be produced? For whom should it be produced?

Traditional Economy Economic decisions generally repeat those made in earlier times or by previous generations. Economic decisions generally repeat those made in earlier times or by previous generations.

What: What: –The goods and services produced today are the same as those produced in previous generations How: How: –Method of production is the same as the previous generation For whom: For whom: –Finished goods and services are traded locally for other finished goods and services

Centrally Planned/Command Economic decisions are made largely by an authority such as a government agency. Economic decisions are made largely by an authority such as a government agency.

What: What: –A central planning authority decides what goods and services to produce. How: How: –A central planning authority determines sites of factories, number and wages of employees, methods of production, and quotas for each good and service. Who: Who: –Members of party in power and other designated individuals receive finished products first and others in the society get the products second.

Market Economy Economic decisions are made by individuals in their roles as consumers, workers, business owners, and savers. Economic decisions are made by individuals in their roles as consumers, workers, business owners, and savers.

What: What: –Businesses seek profits producing what consumers want. How: How: –Individual business owners decide the method of production to equal or better competition. Who: Who: –Finished goods and services are distributed to those individuals who are willing and able to buy them.

Mixed Market Economy Like the Market system except the government has some rules and regulations that individually owned businesses have to follow. Like the Market system except the government has some rules and regulations that individually owned businesses have to follow. The government also owns some businesses. The government also owns some businesses.

What: What: –Businesses seek profits producing what consumers want. The government has some rules and regulations on businesses. The government produces goods and services to fill the need of society as a whole. How: How: –Individual business owners decide the method of production to equal or better competition. Producers, consumers, and government determine the goods and services produced.

Who: Who: –Finished goods and services are distributed to those individuals who are willing and able to buy them. –Government produced goods and services are distributed to those individuals as the government determines.

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