1. ECONOMIC SYSTEMS

2. In this chapter, we learned about economic resources, and how there was a limited supply of those resources. We learned we had to choose between our wants in order to use the resources effectively.
Those limited resources are the same reason every nation must answer 3 questions.. .

3. What IS an economic system?
An organized way of providing for the wants and needs of the people within a society.
in other words, it answers those 3 key economic questions

4. What goods and services should be produced?
How should they be produced?
For whom should they be produced?

5. WHAT to produce?
can’t please everybody all the time
must use resources effectively
ex. find balance between military and consumer goods

6. HOW to produce?
same solution doesn’t work for everyone
use what you have--answers often based on availability of economic resources
ex. building a road (capital vs. human labor)

7. FOR WHOM to produce?
not all are created equal--must decide who benefits
purchase power may be limited if consumer goods are not at the top of the list
ex. tractor production

8. There are 3 types of economic systems:
custom-based economy (also called traditional)
directed (planned) economy
market economy

9. CUSTOM BASED ECONOMY
country usually less developed
goods produced the same way forever (traditionally)
tools are simple and use people/animals for energy
growth is slow

10. DIRECTED (PLANNED) ECONOMY
resources owned/controlled by gov’t
gov’t says what to produce and how to produce it
this extends to military as well as capital goods
may resort to police force to carry out economic wishes
freedom in this society is typically limited

11. MARKET ECONOMY
country typically has democratic gov’t
consumers and businesses choose what to buy and sell based on their own interests
money is exchanged for goods/services
no one tells consumer what to buy or tells a business what to sell
ex. movie/mail order/tennis lessons