1. Basic economic systems Command economy Vs. Free Market Economy
Objective 7.4
Basic economic systems
Command economy
Vs.
Free Market Economy

2. What is an economic system?
an established way of dealing with…

3. goods consumer services capital Economic Choices resources producer
land
Economic Choices
resources
producer
distributor
labor
entrepreneur
management

4. established ways of dealing with WHO makes economic decisions
economic systems are
established ways of dealing with WHO makes economic decisions
What? How? For whom? How Many?

5. “Chart of economic systems”
WHO DECIDES?
What to produce?
How to produce?
How much produced?
For whom to produce?
GOVERNMENT
INDIVIDUALS OR

6. Command vs Free-Market Economic systems

7. command
economic
system

8. centrally planned economy:
Characteristics of a command economic system
centrally planned economy:
The government decides
What? How? For whom? How Many?

9. command economic system
centrally planned economy:
The central government
has complete control
over all economic choices

10. command economic system
central ownership of property and resources:
The central gov’t owns all factors of production and decides how resources are used

11. command economic system
The individual has
no private property and no control over economic choices

12. Characteristics of a command economic system
lack of consumer choice:
the consumer
has NO choice in deciding what will be produced

13. command economic system
COMMUNISM:
is a type of command economic system

14. Free Market
economic
system

15. Free Market economic system
Individual Choice
individuals own resources as private property
Owners of private property make their own economic decisions
What? How? For whom? How Many?

16. Free Market economic system
The government plays little role in making economic decisions

17. Free Market economic system
private ownership of resources:
Individuals own the factors of production and decide how resources are used
Anyone can be an entrepreneur

18. Free Market Economic decisions are motivated by profit:
$ from sales – expenses=profit
“money that is made after the bills are paid”
Profit gives people more wealth, which allows them to produce & consume

19. Free Market economic system
consumer sovereignty (control):
Consumers can decide how to meet their wants & needs
Consumer demand drives what G/S (Goods and Services)are produced
Producers supply what consumers Demand

20. Free Market economic system
Promotes competition:
producers compete for profits
Similar products by different producers made to meet demand (Coke vs. Pepsi)

21. Free Market economic system
Benefits of competition:
More consumers choices
Fair prices for G/S
Leads to new product ideas

22. Free Market economic system
CAPITALISM:
One type of free market economic system is “capitalism”

23. Chart of economic systems
CHOICE
WHO DECIDES?
What and how much produced
How to produce
For whom to produce
GOVERNMENT
INDIVIDUAL

24. Which characteristics define mixed market economy?
Objective 7.5

25. Describe the role of the government in the United States economy
Objective 7.6

26. Which characteristics define mixed market economy?
There are no true Command or free market economies in the world today.

27. Which characteristics define mixed market economy?
Most economies are some combination of the two
These are called Mixed Market economies

28. Which characteristics define mixed market economy?
Command + Demand=Mixed
** the most common economic system used in the world today.**

29. Which characteristics define mixed market economy?
Existence of a
Economic decisions are made by
individuals & businesses
Private Sector

30. Which characteristics define mixed market economy?
Individuals/businesses that own private property and produce G/S for consumers
Private Sector=

31. Which characteristics define mixed market economy?
Existence of a
Economic decisions are made by the government
Public sector

32. Government owned resources used to produce public G/S
Which characteristics define mixed market economy?
Government owned resources used to produce public G/S
Public sector=

33. Two different Mixed Markets
China vs USA

34. Which characteristics define the US Economy?
The Economic system of the U.S. =
mixed market system

35. Which characteristics define the US Economy?
Private companies operate with limited government role
Shows most characteristics of a free market
*Ownership of Private property
*Competition *profit
*consumer sovereignty

36. Which characteristics define the US Economy?
What is the role the
government plays?
The role of the gov’t is limited but also very important to the health of the US economy

37. Prevents unfair business practices Ex-monopolies
Government…
Prevents unfair
business practices
Ex-monopolies

38. regulates business by creating regulatory agencies
Government…
regulates
business
by creating regulatory agencies

39. (Federal Trade Commission)
FTC
(Federal Trade Commission)
investigates businesses for monopolies and
unfair practices

40. FCC (Federal Communications Commission) regulates radio and TV

41. (Environmental Protection Agency)
EPA
(Environmental Protection Agency)
protects and enhances
the environment

42. provides public goods & services paid for with tax revenue
Government…
provides
public goods & services paid for with
tax revenue

43. example: interstate highways U.S. Postal Service national defense

44. Pass laws to protect consumer & property rights
Government…
Pass laws to protect
consumer & property rights