ECONOMIC SYSTEMS

Throughout history, people have organized economic systems to meet their wants and needs. In the study of economics, people must make decisions as to 1) What to produce? 2) How to produce it? and 3) For whom shall the goods and services be produced? The basic economic systems are traditional, command, market, and mixed.

TRADITIONAL Based on traditions and customs Based on traditions and customs

TRADITIONAL Major Features Major Features –Based on agriculture –Limited barter trade Example Example –Neolithic Civilizations –Early River Valley Civilizations

MARKET producers and consumers determine WHAT, HOW, and FOR WHOM to produce producers and consumers determine WHAT, HOW, and FOR WHOM to produce (CAPITALISM) (CAPITALISM)

MARKET Major Features Major Features –Based upon Supply and Demand –Usually focus on consumer goods –Little government control Example –United States

COMMAND a central authority determines WHAT, HOW, and FOR WHOM to produce a central authority determines WHAT, HOW, and FOR WHOM to produce(COMMUNISM)

COMMAND Major Features Major Features –Controlled by strong, centralized government –Usually focuses on industrial goods –Little attention paid to agriculture and consumer goods Example Example –Communist Soviet Union

MIXED Combination of Market and Command economic systems Combination of Market and Command economic systems

MIXED Major Features Major Features –Combination of Market and Command economic systems –Market forces control most consumer goods –Government directs industry in need areas Example Example –Germany

MERCANTILISM building a nation's wealth by exporting more goods than it imports building a nation's wealth by exporting more goods than it imports

MERCANTILISM Major Features Major Features – Colonies supplied their parent nations with raw materials that were used to produce finished goods, and then exported back to the colonies. Example Example –Spanish Colonies in New World

SOCIALISM/COMMUNISM state control of the economy state control of the economy

SOCIALISM/COMMUNISM Major Features Major Features –Government control of all property and means of production Example Example –Soviet Union