1. Economics – Chapter 2, Section 1 Economic Systems
Traditional Economies
In a traditional economy, roles and economic decisions are defined by customs.
Examples include the central African tribes or the Australian Aborigines.

2. Economics – Chapter 2, Section 1 Economic Systems
Advantages
Everyone knows which role to play and there is little uncertainty about WHAT, HOW, and FOR WHOM to produce.
Disadvantage
The discouragement of new ideas and new ways of thinking. This leads to a lower standard of living than other societies.

3. Economics – Chapter 2, Section 1 Economic Systems
Command Economies
In a command economy, a central authority determines WHAT, HOW, and FOR WHOM to produce.
Command economies include North Korea, Cuba, the former Soviet Union, and the People’s Republic of China.

4. Economics – Chapter 2, Section 1 Economic Systems
Advantages
The ability to drastically change direction in a relatively short period of time
Many basic health and public services are available at little or no cost.
Disadvantages
Consumer needs may not be met
The necessary decision-making bureaucracy delays decisions
Little flexibility to deal with day-to-day problems
Individual initiative goes unrewarded

5. Economics – Chapter 2, Section 1 Economic Systems
Market Economies
In a market economy, producers and consumers determine WHAT, HOW, and FOR WHOM to produce.
In each market transaction, the consumer’s dollar acts like a “vote,” ensuring that producers continue to bring to market the goods and services that consumers want to buy.
Example include: US, Japan, Canada, South Korea, and parts of Western Europe.

6. Economics – Chapter 2, Section 1 Economic Systems
Advantages
The ability to adjust to change
The high degree of individual freedom
The small degree of government involvement
The ability to have a voice in the economy
The variety of goods and services created
The high degree of consumer satisfaction
Disadvantages
The inability to meet every person’s basic needs
A poor job of providing some highly valued
services such as justice, education, and health care.
High level of personal uncertainty and the prospect of economic failure.

7. Economics – Chapter 2, Section 1 Economic Systems
Answer the following questions.
How would your life be different if you had grown up in a traditional economy?
In what ways are traditional and command economies alike? In what ways are they different?
In the 1990s, many countries, especially in Eastern Europe, moved from command economies toward market economies. What problems do you think they faced as they made this change?