1. Economic Systems 1. Traditional Economic System
2. Free Enterprise System (Market
System)
3. Command Economic System
4. Mixed Economic System

2. 1.Traditional Economic System
Simple economic activity
Farming, hunting and gathering
Reliance on custom and tradition
Passed down from generation to generation, very
little change over time; very effective
Technology
Simple (Ex.- Horse and plow
bow and arrow)

3. 1.Traditional Economic System
(Male/female)
Family labor and gender roles
Examples
Can still be found in parts of
Asia, Africa and South America
Men, women and
children all have jobs
to do

4. 2. Free Enterprise System (Market/Capitalist)
Individual ownership of economic resources
Land, labor, capital,
Entrepreneurialship
Individual control of economic resources
Individuals decide how goods and services are produced and distributed.

5. 2. Free Enterprise System (Market/Capitalist)
Profit motive and business competition
People open a business
with the hope of making money
Compete with similar businesses
Significant individual economic freedom
Individuals make their own decisions
What to buy or sell/ how much to sell for/spend for
Examples: Most developed countries (ex. USA)

6. Behind the Free Enterprise/Market System/Capitalism
Capitalism-economic system based on private ownership and the investment of wealth for profit
CAPITAL=necessary to build
factories, purchase machines,
secure (get) raw materials
and pay workers
Adam Smith
author of “Wealth of Nations”

7. Behind the Free Enterprise/Market System/Capitalism
Law of Supply and Demand:
Sets price
demand/ supply- $
Law of Competition: quality/cost
Laissez-faire: Government should provide a safe atmosphere for businesses to operate, but should not regulate sales/products
Q: Does the US have pure capitalism today???
Tickle Me
Elmo
Wii

8. The Invisible Hand
The market will regulate itself (people will buy or not buy, influencing eco. development)

9. Behind the Mixed System-Socialism
Socialism- economic system in which the factors of production are owned by the public and operate for the welfare of all.
Response to the abuses of the Industrial Revolution on workers. Many people blamed capitalism for abuses.
Socialist government must be a democracy! Ex.
Great Britain
Sweden

10. Behind Socialism/Welfare State
Government should control all major industries.
Small business allowed, but subject to government regulation
The state (government) is responsible for the welfare of its people.
Wealthy and educated classes should help lower classes
Q: Does the U.S. have elements of socialism?

11. Reform Movements
Union Movement: Unions speak for all of the workers in a particular trade. Engage in collective bargaining which is negotiations between workers and their employers.
Reform Laws: Created to end worst abuses of industrialization. Set standards for age, hours and wages.
Abolition Movement: Ex:England: William Wilberforce -deeply religious member of the English Parliament. Worked to end the slave trade and slavery itself in the British Empire.
Women’s Rights Movement: Grew out of abolition movement. Wanted equal pay for work.

12. 3. Command Economic System
Government ownership of economic resources
Ex.-Factories and farms
Government control of economic resources
Decides how goods are produced and distributed. How much of a product is made.

13. 3. Command Economic System
No profit motive and no business competition
Leads to inferior products
Reduced individual economic freedom
Government controls the prices.
Examples
U.S.S.R. (Soviet Union)
Today: Cuba, North Korea

14. Behind the Command System
Marxism-economic system in which production and distribution are owned by the people.
Karl Marx-wrote “Das Capital”
and “The Communist Manifesto”
No private ownership
Radical/extreme form of socialism

15. Behind the Command System
Economic interpretation of history
Class struggle “Have’s” take advantage of the “Have nots”
The Industrial Revolution intensified the class struggle Proletariat (workers) v. capitalist bourgeoisie (owners)
The labor of workers creates profit for employers
Ultimate communist society is classless and without government

16. 4 Methods of Production Subsistence Agriculture
Farming for home use not,
market use.
Subsistence farmers produce all or most goods his family needs with little left over to sell
Subsistence agriculture is most commonly associated with traditional economic systems.

17. 4 Methods of Production 2. Cottage Industry
Cottage industry is also known as home industry.
Goods are produced in people’s homes, often by
adults and older children working together.
The goods are then sold.
Involves the use of simpler equipment and manufacturing techniques than commercial industry.
Cottage industry is most closely associated with traditional economic systems

18. 4 Methods of Production
3. Market-Oriented Agriculture
Brought about by the Enclosure Movement and Scientific Farming
-Involves the production of farm goods for sale on the commercial market instead of for home use.
-Market-oriented agriculture is associated with both market and command economic systems.

19. 4 Methods of Production 4. Commercial Industry
Commercial Industry involves the large-scale
production of goods
Goods are usually produced in factories with machinery
and a large number of workers
Commercial industry is a more complex production
method than cottage industry.
Commercial industry is associated with both market and
command economic systems.