1. Traditional - Command – Market - Mixed
Economic Systems
Traditional - Command – Market - Mixed

2. Economic Systems - Traditional
Oldest and simplest form of an economic system.
Tribal – Family Units
Rely on habit, custom, or ritual.
(work divided among gender lines)
Slow to adapt to new ideas or technology
Lack modern conveniences
Low standard of living

3. Economic Systems Two Broad Categories:
Market Economy (Capitalistic)
Command Economy (Centrally Planned)
NOTE: No country has a pure Market or pure Command Economy….all are mixed.
Command
Market

4. Economic Systems
How do we determine, or measure, the type of economic system you have?
Three Questions are asked:
What goods and services are produced?
How should these be produced?
For Whom should these be produced?

5. Economic Systems
Market Economy

6. Economic Systems - Market
1st Question
What goods should be produced?
Consumers decide
Private businesses form to meet consumer’s wants and needs.
If consumers don’t want it, it won’t be produced.

7. Economic Systems - Market
2nd Question
How should goods be produced?
Businesses decide.
They must compete with other companies and products. The individual companies must find the most efficient way to produce to be able to succeed.

8. Economic Systems - Market
3rd Question
For Whom should goods be produced?
For whomever can afford it.
If you do not have money you cannot buy the good. TOO BAD.
Nobody is entitled to goods or services. To be able to buy goods, people are motivated to work and earn money.

9. Economic Systems
Command Economy

10. Economic Systems - Command
1st Question
What goods to produce?
Government decides.
Government chooses what is important to spend their resources on.
EX: military vs. furniture.
Thus, shortages will exist for goods that aren’t deemed important by government

11. Economic Systems - Command
2nd Question
How should goods be produced?
Government decides.
Govt owns the means of production. They employ workers and control industry. They set wages and determine schedules. No bargaining or competition.

12. Economic Systems - Command
3rd Question
For Whom should goods be produced?
Government decides who gets what and how much.
All people share equally in wealth. Every one has basic needs met. Govt provides housing (dictates where to live), provides food (decides what to eat), provides jobs (determines where to work)

13. Economic Systems (REVIEW)
Two Broad Categories:
Market Economy (Capitalistic)
Command Economy (Centrally Planned)
NOTE: No country has a pure Market or pure Command Economy….all are mixed.
Command
Market

14. Economic Systems - MIXED
All economic systems are Mixed.
To what degree?
Three Models (philosophies)
Capitalist Model
Socialist Model
Communist Model
Command
Market
Communist
Socialist
Capitalist

15. Economic Models – Capitalist
Same as Free Enterprise
Characterized by “self-interest” and “competition”
Self-Interest is the motivating force in the free market. Because government does not “provide” for people but allows them to purchase and own what they want, individuals are motivated to work to earn money for purchases.

16. Economic Model - Capitalism
Competition exists in a free market system as businesses struggle to gain dollars from consumers.
As business compete for profit, the free market is “regulated” through company’s incentive to lower prices and provide better products.

17. Economic Model - Socialist
Government reduces difference between rich and poor. (Classless system)
Key industries run by government (control prices / provide employment)
Provide services for all. “Cradle to Grave”
High taxes needed to provide services

18. Economic Model - Socialist
This model believes there should be one class. Socialist also believe that all people should have services provided for them…health care, schooling, pensions.
(Cradle to grave coverage)
To do this, those who make money are taxed heavily to “redistribute wealth” and provide all with services. Businesses highly regulated (vacations, hours, etc)

19. Economic Model - Communist
Government runs everything.
All people are assigned jobs / school
Housing assigned according to need
Medical care is free
Government determines products

20. Economic Model - Communist
This system provides no incentive to work and earn money as the government dictates what you make and were you work. Additionally, you are provided for if you do not work.
System fails as there is no competition to improve technology or efficiencies.
Privatization happens (allowing businesses to be privately owned…not govt owned)

21. Economic Systems - MIXED
All economic systems are Mixed.
North Korea
Cuba
Russia
China
France
Germany
Japan
United States
Canada
Hong Kong
Communist
Socialist
Capitalist
Command
Market
Economic Freedom Index