1. Target: Economic systems
Essential Learning: Economic systems and theorists

2. Objectives
Students will demonstrate an understanding of the “Big Three” economic questions and how they apply to the four economic types

3. The Three Basic Economic Questions
Every economic system in the world, past and present, has to answer these three questions:
What to produce? (How did economists answer this question?)
For whom to produce it?
How to produce it? (Who owns the factors of production?)

4. 4 Different Economic Systems
Economic System: An economic system refers to the way in which the resources of a country are used to produce goods and services, and the manner in which these goods and services are distributed for consumption.
4 Different Economic Systems
Traditional
Command
Market/Capitalism
Mixed

5. Traditional Economic System
Economic system is based on customs and traditions (handed down from 1 generation to another).
Allocation of scarce resources stems from ritual, habit, or customs
BARTER!! Means trade! No money!
Examples: African tribes, parts of India, the Australian Aborigines

6. Examples of Traditional Economies
Aborigines Inuits

7. Advantages Disadvantages
Economic roles are set
Stable, predictable, and continuous
Discourages new ideas
Lack of progress
Lower standard of living
No technology

8. How does a traditional economy answer the big three questions?
What will be produced?
Whatever tradition, values, and rituals dictate
How will it be produced?
However tradition, values, and rituals dictate
For whom will it be produced?
Whomever tradition, values and rituals dictate

9. Command Economy
A central authority (government) has to answer the big three questions
Government decides the needs of the people, the best way to produce it and for everyone!

10. Command Economy There is very little if any input from the people.
Examples: North Korea, Cuba, China

11. Advantages Disadvantages
Basic Needs taken care of
Education, public health, other services cost very little if anything
Very little unemployment
Doesn’t meet wants
No incentives
New and different ideas are discouraged
No room for individuality
No competition
No variety
No private ownership

12. How does a command economy answer the big three questions?
What is being produced?
Whatever the government decides
How is it being produced?
The government will tell someone to make it
For whom is it being produced?
Whomever the government decides needs it

13. Market/Capitalism
System that relies on consumption choices made by consumers
Consumers dictate what is produced, how much is produced, and how much things cost

14. Capitalism/Market
Examples: Canada, South Korea, Singapore, Germany, Great Britain, and the UNITED STATES!

15. Advantages Disadvantages
Individual Freedom for all
Lack of government interference
Incredible variety to choose from
High degree of consumer satisfaction
Free enterprise
Competition
Lots of technology
Economic growth
specialization
Rewards only productive people (unequal distribution of wealth)
Workers and businesses face uncertainty (Competition)
Not enough public goods (Education, health, defense)
Unemployment
Must guard against market failure

16. How does a market economy answer the big three…
What will be produced?
Whatever the consumer wants
How will it be produced?
Entrepreneurs will respond to demand
For whom will it be produced?
Whomever is willing to work for it (or afford it)

17. Mixed Economy A mix of all of the other three economies
Some government involvement, consumer driven, aspects of economy based on traditional values
This is really what the US is….
Examples: Obama Care, Bail outs yet consumer driven. Family owned stores and corporations.

18. Classwork/Homework
In a formal paragraph, tell me which economic system you believe is the best. Consider your needs and wants. All systems had their advantages and disadvantages – which one do you support?