1. Economic Systems

2. Learning Goals Identify the THREE economic questions.
Differentiate among the main types of economic systems.
Describe the economic system of the United States.

3. 3 Questions All nations and economies face the basic economic problem.
As a result…all nations and economies are faced with 3 basic economic questions…
What to produce?
How to produce?
What (who’s) needs to produce for?

4. What to Produce???
The resources available to a country will effect what they produce.
A country with an abundance of rich farmland is likely to produce agricultural resources.
A country with a large population of people is likely to produce human labor.

5. How to Produce???
Economies and nations must decide how to make the most of the resources they have
Careful choice of how to produce will increase the efficiency and productivity of an economy

6. What (who’s) needs to produce for?
There will always be an abundance of needs and wants to meet…
An economy must decide which ones (and whose) to meet…
In the US, this decision is made mostly by who has money and how they choose to spend it.

7. Economic Systems
A nation’s plan for answering the 3 questions is called its economic system.
The type of system is based on how much the government is involved in decisions

8. Traditional Economies
In some extremely underdeveloped countries, simple economies operate according to tradition or customs
Goods and services are produced in the ways established by tradition
The economy is centered on meeting people’s basic needs, and rarely advances

9. Command Economy
In a command economy, the resources are owned and controlled by the government
Government determines:
How to produce
What it produces
How to share goods and services
Personal economic freedom is often very limited

10. Market Economy
In a market economy, the resources are owned and controlled by the people (consumers)
Consumers determine:
What to produce
How much to produce
What to purchase
Individuals buying and selling makes economic decisions
Consumers cast “dollar votes” with what they buy

11. Economies of the world
Take a few minutes to research online for examples of the three economic systems.
Then……
…go to our website
and click on the globe
seen here to post your
answers.

12. Mixed Economy
All nations and economies combine some elements of command and market systems
Each system leans towards one direction or the other…
The US leans toward market, but the government still controls some elements like…
Examples include?

13. The US Economic System The U.S. operates with a system of Capitalism
Individual owners are free to decide what to buy
Individual freedom is a reason the U.S. is also called a free enterprise system
In capitalism, people are free to go into business for themselves. This is called: entreprenuership

14. Elements of Capitalism
Capitalism has 4 key principles
Private Property: individuals can own, use, or dispose of things of value
Freedom of Choice: people can make their own choices and accept the consequences of decisions
Profit: the money left from sales after costs of operation have been paid
Competition: the rivalry among businesses to sell their goods and services

15. Profit
Unless they are a non-profit organization, most businesses operate to make money
Businesses invest resources and take risks in hope of making a profit
Profit is the heart of capitalism

16. Competition
Because of competition, consumers have many choices of products and services
Competition benefits consumers by:
Constantly improving products
Creating new innovations
Keeping prices low
The absence of competition is a monopoly

17. Wrap Up All economies must answer:
What to produce?
How to produce?
What (whose) needs to satisfy?
An economic system answers these questions
The United States has Capitalism as its economic system
Because of capitalism, businesses in the US operate to earn a profit