ECONOMIC SYSTEMS

Basic Questions to ask yourself.

1. What goods and services should be produced? How many of the good should be produced?

2. How should the goods be produced?

3.Who are goods distributed to? This all depends on the type of economic

system.

Definitions Factors of Production

Items necessary to produce goods Who can name them?

Land Labor Capital (money, buildings, equipment, etc.)

Services: Having a task or job done for you. Getting car fixed

Goods: Products you can hold, own or touch. Two types: 1) Durable goods: Items you will have for a long

time (i.e. Cars, Washing Machines, and TVs) 2) Nondurable goods: Items that are consumed

quickly (i.e. T-shirts, pens, food)

Traditional Economies

Tradition and customs decide what an individual does for his living, so industry, clothing and shelter are the same as in previous generations.

roles of individuals are clearly defined. found in rural, non-developed countries

Cons: societies are often very slow to change when new technology is introduced, these ideas and techniques are discouraged

Market economies Economic decisions are made by

individuals competing to earn profits Resources are owned and controlled by

individuals Supply and demand great variety of goods and services for

consumers there is a demand for a good, the someone

will produce it Laissez-faire

Government stays out of the way (hands off) Capitalist

Command economies The government makes decisions and

determines how resources will be used There is little individual freedom Consumers have few choices in the market place The government dictates the job in which you

work The government sets the prices of goods and

services Inefficient b/c the Government is slow to respond

to market changes. Ex. Cuba, North Korea and the People's Republic

of China

Mixed economies

All three mixed into one Individuals and government are both

decision makers Individuals own means of production Gov. protects consumers and workers

from unfair policies