1. Economic Systems

2. Different economic systems
What goods and services will be produced and in what quantities? How will each of the goods and services be produced? For whom will the various goods and services be produced?

3. the traditional system the command system the market system
 4 types of economic systems …
the traditional system
the command system
the market system
mixed system

5. The traditional system
Traditional system: the same goods are produced and distributed in the same way by each successive generation.
+ Provides clear and easy answers 3 central questions.
- Rigid & slow to adapt to changing conditions; resists innovation.

6. The command system
Command system: participants are instructed what to produce and how to produce it by a central authority which also determines how the output is distributed. AKA centrally planned systems. Central planners answer 3 central questions.

7. The market system
Market system: economic system in which there is free competition and prices are determined by the interaction of supply and demand. 3 central questions answered by market mechanism.

9. VIDEO: https://www.youtube.com/watch?v=ulyVXa-u4wE

10. The functions of prices in a market economy
The rationing function Ration scarce supplies to those who place the highest value on them (and can afford to pay for them).

11. The allocative function
Prices send signals
Excess demand
Prices increase
Higher prices = increased profits
Additional entrants into market
Supply increases
Prices drop back to equilibrium

12. Characteristics of Economic Systems
Click on the following page to unjumble the characteristics of different economic systems…