2.  What is an economic System?  Method used by a society to produce and distribute goods and services  Which economic system a country uses depends on their individual goals and values.

3.  What goods and services should be produced?  Individual Wants & Needs.  How should these goods and services be produced?  What is the most effective and efficient way?  Who consumes these goods and services?  Distribution of income

4.  Relies on habit, custom, or ritual to decide what, how and who to produce goods and services  Usually gender based  Slow in adopting new ways  Technologically behind/slow  Example: India

5.  Economic decisions are made by individuals and are based on exchange or trade.  AKA Free Markets, capitalism  Example: ???

6.  Market: an arrangement that allows buyers and sellers to exchange things  Voluntary  Individuals own the Land, Labor and Capital  Buy what you want

8.  Personal gain!  Motivating force in the free market  Result of ‘self interest’ =  Competition/incentives for growth and success

9.  What is the invisible Hand? (Adam Smith)  Self Interest & Competition regulate market.  Self Interest spurs consumers to purchase certain goods ▪ services & firms to produce them.  Consumers get the products they want, at prices close to cost of production.

10.  Economic Efficiency  What we want, when we want, price we will pay  Economic Freedom  Choice! Where to work, what produce/buy  Economic Growth  Competition = Innovation  Goals/Incentives

11.  Strongly opposed to any government intervention in business affairs.

14.  Government decides how to answer the three questions.  Example: China

15.  Centrally planned economy  ALL economic and political power in the hands of the central government

17.  Centrally Planned Economy  Social and political philosophy  Democratic means used to distribute wealth evenly throughout a society  How does this differ from Communism?

20.  Centrally Planned Economy  Strict obedience from citizens  Do not allow individual freedoms – dictatorship.

21.  Combines Traditional and Free Market with limited government  Example: USA