1. Who get to decide what gets produced?
Economic Systems
Who get to decide what gets produced?
How it gets produced?
And who gets to have it?

2. An economic system… …is a system which deals with the production, distribution, and consumption of goods and services in a particular society

3. Economic Realities Wants > resources = scarcity
Consequences of scarcity
people must make choices
goods and services must be rationed

4. All nations must answer 3 basic economic questions:
What goods and services should
be produced and in what quantity?
EOC study guide
Basic Economic Concepts #4

5. What goods and services should be produced?
Should a local government use resources to build a new school, repair an old highway, or construct a new recreation center?
Should American producers use resources to make goods for national defense or to provide services for retired people who are too old or ill to work?
Should a farmer grow wheat, cotton, or lettuce?

6. All nations must answer 3 basic economic questions:
What goods and services should
be produced and in what quantity?
2. How should these products be
produced?
EOC study guide
Basic Economic Concepts #4

7. 2. How should these products be produced?
• How should we obtain crude oil to meet our energy needs?
• How much pollution should we allow firms to generate when producing goods?
• How should hogs be raised before they become food?

8. All nations must answer 3 basic economic questions:
What goods and services should
be produced and in what quantity?
2. How should these products be
produced?
3. For whom should these products
be produced?
EOC study guide
Basic Economic Concepts #4

9. 3. For whom should these products be produced?
• Who should receive the limited supply of flu vaccinations?
• Who should benefit from the construction of a new school?
• Who should a shoe manufacturer market their products toward?

13. 3 Types of Economic Systems
An economic system that relies on custom or tradition to answer the 3 basic questions
Traditional economy
EOC study guide
Basic Economic Concepts #5

14. Traditional Economy Characteristics
Economic activity written by past generations
Produce goods that satisfy basic survival needs
produce little surplus
engage in minimal trade
Use primitive capital goods--no technology and entrepreneurship
Rigid division of labor
uses gender, age, and skills to define status and role in society
EOC study guide
Basic Economic Concepts #5

15. Amish of Pennsylvania Past generations determined:
the main crops are hay, wheat, barley, rye and corn
crops are harvested using horse-drawn plows
society will voluntarily redistribute wealth to members who are needy

16. Mbuti population of northern Zaire
pygmy hunter-gatherers
live in bands, ranging from 15 to 60 people.
Mbuti population totals about 30,000 to 40,000 people

17. Kavango tribes of Namibia
Kavangos make their living from fishing, cattle, and the farming of sorghum, millet and maize
The chief has power over his entire tribe and is responsible for the allocation of land.
Although the Kavango chiefs are always male, the system is mostly matrilineal

18. Types of Economic Systems Cont.
An economic system that relies on custom or tradition to answer the 3 basic questions
Traditional economy
An economic system in which the government dictates the answers to the basic economic questions
Command economy
EOC study guide
Basic Economic Concepts #6

19. Command Economy Characteristics
The government or other central authority makes all economic decisions
Resources (factors of production) are owned by the government
There is no competition; the purpose of business is to provide goods and services, not to make a profit
Factories are concerned with meeting quotas set by government
The government sets the prices of goods and services
Consumers have few, if any, choices in the market place
EOC study guide
Basic Economic Concepts #6

20. Soviet Union 1920s-1990s
Communist Party dictated the use of society’s resources
Central planning authority sets production levels for almost all products
May redistribute income, usually from society’s high earners to its low earners
Government controls prices

21. North Korea One of the world's last centrally planned systems
market allocation is sharply limited – mainly in the rural sector where some peasants sell produce from small private plots
almost no small businesses

22. Types of Economic Systems Cont.
An economic system that relies on custom or tradition to answer the 3 basic questions
Traditional economy
An economic system in which the government dictates the answers to the basic economic questions
Command economy
EOC study guide
Basic Economic Concepts #7
A type of economy that relies on the individuals and businesses to answer the 3 basic questions and manage the factors of production
Market economy

23. Market Economy Characteristics
Economic decisions are made by individuals competing to earn profits
Resources are owned by individuals
Profit, not quotas, is the motive for increasing work
Competition determines price and increases the quality of products
Individual freedom is considered very important; individuals have freedom to make economic decisions
EOC study guide
Basic Economic Concepts #7

24. Hong Kong A free port that attracted foreign trade and investment
Offers free markets and profit incentives with few government regulations on business activities
Hong Kong enjoys the most economic freedom of any economy in the world

25. Mixed Economies Combines elements of pure market and command economies
Government and individuals share the economic decision making process
Government guides and regulates production of goods and services
Resources are owned by individuals
Government serves to protect both producers and consumers from unfair policies and practices

26. Mixed Economies Index based on Economic Freedom
Economic freedom start at :47

27. Three Basic Economics Questions:
What to produce?
How to produce?
For whom to produce?

28. Command vs Market Economies