1. Economic Systems and Decision Making
Chapter 2

2. Economic Systems Traditional Economy
Allocation of resources stems from ritual, habit, or custom
Strengths
Everyone knows their role
Weaknesses
Discourages new ideas
Lack of progress

3. Economic Systems Command Economy
Central authority makes economic decisions
Strengths
Capable of dramatic changes
Weaknesses
Doesn’t meet needs of consumers
Lacks incentive
Large bureaucracy
Little flexibility
New ideas discouraged

4. Economic Systems Market Economy
People and firms answer economic questions
Strengths
Adjusts to change gradually
Individual freedom
Decentralized decision making
Variety of goods and services
Consumer satisfaction
Weaknesses
Rewards only productive resources
Must guard against market failures