1. 3 Economic Questions Every country must answer these 3 questions
1. What are we going to produce?
2. How are we going to produce them?
3. Whom are we producing them for?
How they are answered will determine what type of economic system they have

2. Economic Systems
1. Traditional - Economic decisions rely on customs or rituals
2. Centrally Planned(Command) - Economic decisions are made by the Government
-Planners decide what, how and for whom.
- products are usually poor quality and limited supply

3. 3. Market (Free market)
Decisions are made by people engaged in voluntary exchanges
Consumers determine what
to produce
Producers determine how to produce it
Offers a wide variety of goods/services
4. MIXED Economy- Almost all countries have a mixed economy (see page 43)
In US Free market – Consumers, Producers & The Government determine what, how and for whom (to produce)

4. US Market Economy -What makes us different (characteristics)
Private Property- Owners have the incentive to care for their things
Competition - Voluntary exchange benefits all
- leads to better quality, lower prices & more variety

5. Market Cont.
Entrepreneurship - Rewards those who take risks with Profits
Limited Government involvement
Rule of Law
Patents, copyrights
SELF INTEREST drives a market economy

6. Father of Economics Adam Smith “Wealth of Nations” 1776
Main point-Invisible hand of free market system guides the distribution of goods and services
Government should stay out of economics and allow competition to regulate market
Advantages of efficiency
Easy to Regulate
Offers Wide Variety
Smith’s “invisible hand” is now called Voluntary exchange