1. Economic Systems Types of Economic Systems

2. Traditional Economic System  Based on beliefs, customs and ways of doing things handed down from generation to generation  Developed out of cultural and religious values  Most are outgunned by stronger financial, political and military forces  Ex: Middle East, Rural parts of Africa and Latin America

3. Command Economic System  Government controls the factors of production and makes all decisions about their use  Ex: Former Soviet Union, North Korea  Socialism is part of command economy  - government manages some business  Communism is also part of command economy  - resources owned by govt., govt. plans use of all resources, govt. controls all businesses

4. Market Economic System  Individuals own the factors of production and make economic decisions through free interaction  The government does not intervene  Also called a capitalist economy  Ex: United States, Germany  Also called a mixed economy because the government controls some industry

5. 6 Major Characteristics of a Market Economy  1. Little or no government control  2. Freedom of enterprise- people are free to own and control factors of production  3. Freedom of choice- buyers make decisions on what should be produced  4. Private Property- individuals or groups own it  5. Profit incentive- desire to make a profit, people are moved to make products people want  6. Competition- rivalry among producers or sellers of similar good to win more business

6. What system is the United States?  Some argue that we are a market economy  We do not have a pure market economy  We have a mixed economy (govt. controls some industry)  Mixed- combining characteristics of more than one type of economy  U.S. examples  Market- malls, restaurants, entrepreneurship  Command- minimum wage, labor laws, martial law  Traditional- “blue laws” restricting activities or sales of goods on Sunday