1. TYPES OF ECONOMIES

2. TRADITIONAL ECONOMY Long established patterns of what is to be done. Customs and rituals make choices! Retain economic positions of parents/grandparents. Tradition decides your fate (job)

3. MARKET ECONOMY Based on consumers and their buying decisions (rather than gov. control) Individuals decide how resources are allocated & goods distributed. Individuals decide what to consume. Pure market: Government is absent from economic affairs!

4. COMMAND ECONOMY Government controls ALL economic activity. State decides how to use/distribute resources. Example: Communism! Socialism! Market plays no role in production decisions.

5. MIXED ECONOMY Combines SOME elements of Market and Command economies. Decisions made in market by individuals but government ALSO plays a role in allocation/distribution of resources. Which country is an example of a mixed economy?

6. GOVERNMENTAL THEORIES! HOW DID GOVERNMENT COME TO BE??

7. EVOLUTIONARY THEORY State evolved from family! Head of primitive family served as the government authority! Once families got too big, one person took over to be the head Example: Abraham’s descendants in the Old Testament of Bible.

8. FORCE THEORY Born of force! The state would not exist except for the need to resist an enemy!! So they were all brought together (people in the same area) and were under the authority of one person/group.

9. DIVINE RIGHT THEORY Idea that certain people are chosen by a god/gods to rule! (Old theory!!) Ancient Egyptians, Chinese and Aztec’s believed this!

10. SOCIAL CONTRACT THEORY Idea that the government will provide protection, social order and services in exchange for payment and obedience of the people. All people have “natural rights” Right to life, liberty and property !!