1. Three Types of Economies
Ch. 13
Sec. 3 Pp

2. Traditional Economies
Basic economic decisions are made according to long-established patterns of behavior that are unlikely to change.
Family is basic unit, but all members work together to support the society, not just their family
Mainly in Central and South America, Africa, and Asia

3. Traditional Economies
What to produce
How to produce (traditional methods)
Who gets what is produced (shares divided)
Who owns the resources (usually small; few resources and goods needed)

4. Command Economies
The government or a central authority owns or controls the factors of production and makes the basic economic decisions
Government may set wages and decide who gets what job

5. Command Economies
Central planning group makes most decisions about how, what, and how much to produce
Consumers have little or no power to determine what is produced
Central authority decides who gets what

6. Market Economies
Private individuals own the factors of production and are free to make their own choices about production, distribution, and consumption
Decisions take place in a bargaining process in the markets (place where buyers and sellers agree to exchange goods and services)

7. Market Economies
The value of what you have to offer sets the value of what you can get
Everyone takes part by freely making economic decisions
You are free to decide how to use land, labor, and capital
Major economic decisions about what and how much to produce and how to produce it are made by individuals

8. Market Economies
Profit – difference between the cost of production and revenue
Profit-seeking and competition is important in this type of economy
Investing – using your own money to help a business start or grow

9. Market Economies
Free enterprise – individuals in a market economy are free o undertake economic activities with little or no control from the government
Capitalism – people make their own decisions about how to save resources as capital and how to use their capital to produce goods and services

10. Chairman of the Federal Reserve
Modern-Day Economies
Most countries today have an economy that is a mixture of the three basic types
China became one in the 80s and 90s
U.S. is considered a market economy, but there is some government control
Ben Bernanke
Chairman of the Federal Reserve