1. Economic Systems & Allocation Strategies

2. Standard
SSEF4A: The students will compare and contrast different economic systems and explain how they answer the three economic questions of what to produce, how to produce, and for whom to produce.

3. Traditional Economies
A traditional economy relies on habit, custom, or ritual to answer the three economic questions.
This system revolves around family, and communities are relatively small and close.
Inuit tribes of Northern Canada and the Sami reindeer hunters of northern Scandinavia are examples of traditional economies.

4. Command Economies
Command economies are centrally planned, which means the government answers the three economic questions. The government is totally in charge!
These economies are also referred to as communist or socialist.
Command economies usually inefficient – lacking important resources needed to help the people.
Real life examples are: North Korea, China, Cuba, and the former Soviet Union.

5. Market Economies
Market economies involve people making all of the decisions. Government has decision-making power.
These economies can be referred to as free-market or capitalist.
Examples of true market economies are Hong Kong & Singapore.
Supply and demand play a role in determining what to produce, how to produce, and for whom to produce.

6. Mixed Economies
Most modern economies are mixed, which means they contain elements of market and command economies.
The government will make some decisions, but people are mainly free to answer the three economic questions.
Examples include: United States, Canada, Germany.

7. Economic Systems Continued
Private Ownership
Profit Motive
Consumer Sovereignty
Competition
Govt.
Regulation
Traditional No
Command
Yes/Total
Market
Yes
Mixed
Yes/In Most Cases
Yes/In Most
Cases
Yes/Limited

8. How well does each system meet the economic goals?
Freedom
Equity
Growth
Efficiency
Price
Stability
Full
Employment
Traditional NO
YES
Command
N/A
Market
Mixed
YES & NO

9. Strategies for allocating scarce RESOURCES
Allocation refers to the distribution of resources.
There are several methods for allocating resources.
1. Supply & Demand – If you have the money and want the good/service, you can have it. This is an efficient strategy.
2. Authority – The government determines what you eat, where you work, and where you live. This is an inefficient strategy.
3. Random Selection (Lottery) – The government randomly selects who gets farm land. This is an inefficient strategy.

10. Strategies for allocating scarce RESOURCES
4. First Come, First Served – The person gets the resource if they are first in line. Giving the first 100 people free concert tickets. This is an inefficient strategy.
5. Personal Characteristics – Allocation is based on need or merit. The seniors get to choose their jersey numbers before the sophomores. This strategy can be inefficient.
6. Contest – The person who wins, gets the resource. The student with the highest GPA gets to be the valedictorian. This strategy can be inefficient.