1. Moscow 1988
Why would people stand in line all day for one roll of toilet paper?

2. Traditional
Command
Market
Economic SYSTEM $

3. Every society has an economic system in which people make and distribute goods and services.

4. What is AN ECONOMIC SYSTEM?
An economic system describes how a society determines what to produce, how to produce, and for whom to distribute goods and services.

5. For whom will it be produced?
In any type of economic systems 3 basic questions must be answered.
What will be produced?
How will it be produced?
For whom will it be produced?

6. The 3 Economic Systems
Traditional
Command
Market

7. Traditional ECONOMIC SYSTEM
Traditional economic system is a community based system in which all factors of production rely on customs, and beliefs.
There is very little change.
Trade is usually very limited.
Today traditional economies are not common.

8. Traditional ECONOMIC SYSTEM
What? Tradition, customs, and beliefs decide what goods and services will be produced.
How? Tradition, customs, and beliefs decide how goods and services will be produced.
For whom? For people who live in the community or the village.

9. COMMAND ECONOMIC SYSTEM
In a command economy the factors of production is owned and controlled by the government.

10. Command Economic System
What? The government decides what products are needed.
How? Since the government owns all means of production, it decides how goods and services will be produced.
For whom? The government decides who will get what is produced. .

11. Market ECONOMIC SYSTEM
In a market economic system the factors of production are controlled by individuals or corporations.

12. Market ECONOMIC SYSTEM
What? Consumers and producers decide what should be produced. How? Consumers and producers decide how to produce. For whom? Consumers.

13. All economies in the world have aspects of both command and market.
IMPORTANT!
Traditional economies only make up a small part of a country’s economy.
There are NO PURE Market economies in the world
There are NO PURE Command economies in the world.
All economies in the world have aspects of both command and market.

14. Therefore… All modern economies in the world are MIXED economies.
But the mix is different in every nation.

15. 77% 74% 71% Russia 50% PURE COMMAND PURE MARKET100% 0%
USA
77%
United Kingdom
74%
Germany
71%
Russia
50%
PURE COMMAND 0%
PURE MARKET100%
In which country do you think it would be the easiest to start a business?

16. Percentage of Market

17. Economic Freedom Index
The numbering system is based on The Heritage Foundation’s Economic Freedom Index The Heritage Foundation has partnered with the Wall Street Journal for over a decade to evaluate each country based on a set of 10 criteria to determine economic freedom.

18. What is Economic Freedom?
Economic freedom is the key to a greater quality of life. It’s the freedom to choose how to produce, sell, and use your own resources, while respecting others’ rights to do the same.  Economic freedom is an engine that drives GDP and is the difference between why some countries prosper while others do not.

19. Identify the economic System
The Inuit of northern Canada serve as a prime example of a ___________economy. For thousands of years, the Inuit parents have taught their children the survival skills needed to survive in the Arctic Circle's severe climate. The children are taught to fish, hunt, and make effective tools. Once learned, these skills are passed down to the next generation. When the Inuit hunt, it is traditional for them to distribute the harvest with other families in the community.

20. Review
True of False.
The economies of Germany, Russia, and the United Kingdom have aspects of both command and the market economic systems. Explain.

21. REVIEW
An entrepreneur is someone who starts their own business. In a command economy entrepreneurs rarely exist. Why?

22. Which economic system is the MOST centralized?
Review
Which economic system is the MOST centralized?

23. Review
This picture BEST represents a _______ economic system.