1. Economic Systems

2. Economic Systems
Economic systems are the ways by which societies make economic decisions. All systems must answer these questions:
What to produce?
How to produce?
For whom to produce?
There are four types of economic systems.
traditional, market, command, & mixed

3. Traditional What to produce? Only what is needed How to produce?
depends on history, traditions, customs of the people in that region. Society produces only what is needed.
Little is done to ever modernize this system.
Economic decisions repeat those made in earlier times.
Decisions are made the way they always have been.
Customs are passed on from one generation to the next.
Land is commonly owned.
barter – to trade one good or service for another
What to produce?
Only what is needed
How to produce?
They way it’s always been done(custom)
For whom to produce?
For
examples:
villages of India (remote areas)
remote African tribes

4. Command What to produce? What the government decides is needed
How to produce?
The way the government feels is best
For whom to produce?
For whom the government wants to produce
Economic decisions are made by the government, shortage of goods often exists.
examples:
Cuba & North Korea
former Soviet Union
China (was command - now has a mixed system)

5. Market What to produce? Economic decisions are made by individuals.
The wants and needs of the consumers
How to produce?
The most efficient and economical wat
For whom to produce?
The consumers
Economic decisions are made by individuals.
Consumers decide what is produced by what they purchase.
Producers determine how to produce goods and services.
They want the most economical way (have to compete with other producers), & ONLY the most efficient will stay in business.

6. Mixed Mixed is a blend of command and market systems.
Most systems are a mixture of systems (not all of one or the other). In order to protect consumers and be economically successful
Producers determine production, but the government sets safety standards for products.
United States – OSHA, FDA, safety laws that regulate trade