1. Economic Systems
Economics

2. What is an Economic System?
The way in which a nation uses its economic resources to satisfy peoples wants and needs.
Each economic system answers the 3 Basic Questions:
1. What should be produced?
2. How should it be produced?
3. For whom should it be produced?

3. Types of Economic Systems
The 4 major economic systems all answer the 3 Basic Questions differently.
There are 4 major types of economic systems:
Traditional
Command
Market
Mixed

4. Traditional Economy
3 Questions are answered according to tradition, customs, and beliefs.
Ideas, skills, and rules are handed down from generation to generation.
+ = Known expectations, strong fam/ community.
- = change/innovation is discouraged, choice is very limited, production is inefficient.
Examples: Inuit of NA, Kalahari of Africa.

5. Command Economy 3 Questions are answered by the government.
Individual business owners have little say in what is produced, how much is made, etc.
The government also decides how goods are distributed.
+ = Decisions can be made quickly
- = lack of incentive to work hard, be creative; also lack of choices
Examples: North Korea, China, former Soviet Union

6. Market Economy Also known as Capitalism…the goal is to make a profit.
3 Questions are answered by individuals/ business owners with no government intervention.
Prices determine themselves based on supply and demand.
+ = Many choices, potential for profit, creativity is rewarded, competition means lower prices, better quality.
- = Those unable to work may suffer, owners may take advantage of workers.

7. Mixed Economy A combination of a market economy and a command economy.
Most countries, including the U.S., have a mixed economy.
Individual decision making is combined with government intervention and regulation.