1. Economic Systems

2. 3 Types of Economic Systems
Traditional
Command
Market/Capitalism

3. Traditional Economic System
The economic system in which people rely on farming and very simple barter trading.
Producers and consumers make choices based on what has been done in the past.
Often economic decisions are handed down from generation to generation.
Example – Farmer

4. Command Economic System
The most important aspect of this type of economy is that all major decisions related to the production, distribution, commodity and service prices, are all made by the GOVERNMENT.

5. Command Economic System
The GOVERNMENT decides what goods will be produced, and how they will be distributed.
Run by a strong centralized government and tends to focus on industrial goods

6. Command Economy Benefits Prices are controlled
People know how much everything will cost
Luxury items are priced high
Clothing & Housing low
Health care & education provided for free

7. Command Economic System
Problems
Trying to predict what type of goods people will need
Can lead to having too many of one good and not enough of another

8. Command Economic System

9. Capitalism/Market Economic System
In a market economy, national and state governments play a minor role
CONSUMERS and their buying decisions drive the economy
A market economy is controlled by the forces of supply and demand.
Allows business owners to compete in the market with little government control. However, the role of government is important

10. Capitalism/Market Economic System
Decisions are left to businesses and individuals and the forces of supply and demand to determine what is produced and its value.
Example - USA

11. Market Economy Problems Benefits Goods and services go up in price
If a company does not manage its money well it can go out of business (people loose their jobs & income)
Benefits
Consumers can find the goods they need
Free to earn enough money as they want

12. Continuum of Economies
Free market
Hong Kong U.S.A
Canada
United Kingdom
France
Japan
Poland
Mexico
China
Iran
Russia
Cuba
North Korea
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Command
There are no pure free market or pure command economies in the world. All economies are mixed. They fall some where along a continuum as shown above.