1. Types of Economic Systems

2. Market The government has no say in what, how, or for whom to produce The factors of production are owned by individuals The market regulates itself through self- interest, which means that people will make the economic choices that are best for them and these choices will help the economy grow Adam Smith called this “the invisible hand”

3. Command -The government answers the three basic questions -The government maintains control over the factors of production, giving individuals little or no choice

4. Traditional -Based on custom or tradition -Economic roles are usually passed down from parents to children -How items are produced is also based on traditional practices -In a traditional economy, distribution of economic product is centered around the nuclear family structure of traditional societal structure

5. Mixed economies All economies today are mixed The three main categories of mixed economies are: Authoritarian socialism (communism) Capitalism (free enterprise) Democratic socialism

6. Mixed economies Authoritarian socialism Nearly all the factors of production are owned by the government The government makes long range plans for the country that limit the choices of individuals Democratic socialism A mix of capitalism and communism The government usually owns key industries, utilities, and phone networks, but does allow for private ownership of other industries

7. Mixed economies Capitalism Closest to the market model Individuals and businesses decide the what, how, and for whom questions The government’s role is to provide services that individuals cannot provide for themselves, and enact legislation that allows the market to work in a way that benefits society as a whole