1. Introduction to Business & Marketing
Economic Systems
Introduction to Business & Marketing

2. Recap From Last Class Economy Resources Factors of Production Land
Labor
Capital
Entrepreneurship

3. Basic Economic Questions
Each nation must answer the three economic questions when deciding how to use their limited resources.
The economic questions define the nation’s economic system.
What goods and services should be produced?
How should those goods and services be produced?
For whom should the goods and services be produced?

4. Economic Systems TASK 42:
Compare the American economic system to other economic systems.

5. Economic Systems
Economists classify economic systems into three categories:
Traditional Economies
Command Economies
Market Economies

6. Traditional Economy
The allocation of resources is based on habit or customs:
tradition
religious practices
cultural beliefs & ideals
Economic activities are centered around the family unit.
Customs and traditions shape the economic system. Allocation of resources is based on habit or custom – farming, hunting and gathering have been done the same way for generations. Economic activities are centered around the family unit. Technology is not generally embraced.
Examples: Bangladesh, Nepal

7. Traditional Economy (Custom-based)
What: little choice as to what to produce
How: bound to tradition; follow what their families have done for generations
For Whom: tradition regulates who sells goods and to whom

8. Command Economy The economy is centrally planned and directed.
Resources are owned and controlled by the government.
Examples: Cuba, North Korea

9. Command Economy (Directed)
What: one person (dictator) or one governing body decides what to produce
How: resources are owned and controlled (distributed) by the government
For Whom: government decides who will receive which goods to meet basic needs

10. Market Economy Private enterprise drives the economy.
Individuals own resources.
Businesses compete for customers.
There is NO government involvement.
Found in societies with democratic forms of government where individuals control the economy.
It is called a market economy because the market is what drives business.

11. Market Economy (Private Enterprise)
What: consumers decide what will be produced by the purchases they make
How: companies find the most efficient means of production to increase profits
For Whom: people with purchasing power
WHAT – consumers have purchasing power, the power of the dollar bill. Poor products will not be purchased and those businesses will cease to exist.

12. Comparing Systems Activity
Examine the differences that exist between nations using different types of economic systems.