1. Economic Systems

2. Economic Questions What to produce?What to produce? –Allocation of factors of production How to produce?How to produce? –Methods of production For whom to produce?For whom to produce? –Distribution of goods & services

3. Traditional System Questions answered by custom, habit, religionQuestions answered by custom, habit, religion Choices are limited, change comes slowlyChoices are limited, change comes slowly Family values are keyFamily values are key to social structure Amish Iroquois Indians

4. Command System Central authority regulates productionCentral authority regulates production Government owns the factors of productionGovernment owns the factors of production Limited set of goods producedLimited set of goods produced

5. Market System Private firms produce goods & servicesPrivate firms produce goods & services Private producers decide how much to producePrivate producers decide how much to produce The “invisible hand” guides the economyThe “invisible hand” guides the economy

6. Mixed Market Systems Government acts as stabilizer of economic activityGovernment acts as stabilizer of economic activity Large unions & large corporations can dominate the marketLarge unions & large corporations can dominate the market

7. Private ownership is mixed with public ownership of factors of productionPrivate ownership is mixed with public ownership of factors of production Regulation of private economy may be strong or weakRegulation of private economy may be strong or weak