Chapter 2 Economic Resources and Systems Section 2.2 Economic Systems.
Economic Systems
description
Transcript of Economic Systems
![Page 1: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/1.jpg)
Economic SystemsEconomic Systems
UNIT FOUR NOTESUNIT FOUR NOTES
![Page 2: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/2.jpg)
Economic SystemsEconomic Systems An An economic system economic system describes how a describes how a
country’s economy is organizedcountry’s economy is organized Because of the problem of Because of the problem of scarcityscarcity, every , every
country needs a system to determine how to country needs a system to determine how to use its productive resourcesuse its productive resources
An economic system must answer 3 An economic system must answer 3 basic questions…basic questions…
![Page 3: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/3.jpg)
Economic SystemsEconomic Systems WHAT TO PRODUCE? WHAT TO PRODUCE? (What kinds of goods and (What kinds of goods and
services should be produced?)services should be produced?)
HOW TO PRODUCE? HOW TO PRODUCE? (What productive resources (What productive resources are used to produce goods and services?)are used to produce goods and services?)
FOR WHOM TO PRODUCE? FOR WHOM TO PRODUCE? (Who gets to have the (Who gets to have the goods and services?goods and services?
![Page 4: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/4.jpg)
Four Types of Economic Four Types of Economic Systems:Systems:
1. Traditional Economy1. Traditional Economy
2. Command Economy2. Command Economy
3. Market Economy3. Market Economy
4. Mixed Economy (Market + Command)4. Mixed Economy (Market + Command)
![Page 5: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/5.jpg)
Traditional EconomyTraditional Economy An economic system in which economic An economic system in which economic
decisions are based on customs and decisions are based on customs and beliefsbeliefs
People will make what they always made People will make what they always made & will do the same work their parents did& will do the same work their parents did
Exchange of goods is done through Exchange of goods is done through BarteringBartering: trading without using money: trading without using money
![Page 6: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/6.jpg)
Traditional EconomyTraditional Economy Who decides what to produce?Who decides what to produce?
People follow their customs and make what their People follow their customs and make what their ancestors madeancestors made
Who decides how to produce goods & Who decides how to produce goods & services?services? People grow & make things the same way that their People grow & make things the same way that their
ancestors didancestors did Who are the goods & services produced for?Who are the goods & services produced for?
People in the village who need themPeople in the village who need them
![Page 7: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/7.jpg)
Traditional Economy Traditional Economy Examples:Examples:
Villages in Africa and South America Villages in Africa and South America the Inuit tribes in Canadathe Inuit tribes in Canada the caste system in parts of rural Indiathe caste system in parts of rural India the Aborigines in Australiathe Aborigines in Australia
![Page 8: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/8.jpg)
Command SystemCommand System Government makes all economic decisions & Government makes all economic decisions &
owns most of the propertyowns most of the property Governmental planning groups determine such Governmental planning groups determine such
things as the prices of goods/services & the things as the prices of goods/services & the wages of workerswages of workers
This system has not been very successful & This system has not been very successful & more and more countries are abandoning itmore and more countries are abandoning it
![Page 9: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/9.jpg)
Command EconomyCommand Economy Who decides what to produce?Who decides what to produce?
Government makes all economic decisionsGovernment makes all economic decisions Who decides how to produce goods and Who decides how to produce goods and
services?services? Government decides how to make goods/servicesGovernment decides how to make goods/services
Who are the goods and services produced Who are the goods and services produced for?for? Whoever the government decides to give them toWhoever the government decides to give them to
![Page 10: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/10.jpg)
Command SystemCommand System Countries with communist governments have Countries with communist governments have
Command economiesCommand economies
Examples: North Korea, former Soviet Union, Examples: North Korea, former Soviet Union, CubaCuba
*Germany and Russia have moved away from *Germany and Russia have moved away from having a Command economy since 1991. Now having a Command economy since 1991. Now they have a Mixed economy.they have a Mixed economy.
![Page 11: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/11.jpg)
Market EconomyMarket Economy An economic system in which production An economic system in which production
and distribution questions are answered and distribution questions are answered by prices and profits (supply and demand)by prices and profits (supply and demand)
Most of the resources are owned by Most of the resources are owned by private citizensprivate citizens
Economic decisions are based on Economic decisions are based on Free Free EnterpriseEnterprise (competition between (competition between companies)companies) Important economic questions are not Important economic questions are not
answered by gov. but by individualsanswered by gov. but by individuals Gov. does not tell a business what goods to Gov. does not tell a business what goods to
produce or what price to chargeproduce or what price to charge
![Page 12: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/12.jpg)
Market EconomyMarket Economy Who decides what to produce?Who decides what to produce?
Businesses base decisions on supply and demand Businesses base decisions on supply and demand and free enterprise (PRICE)and free enterprise (PRICE)
Who decides how to produce goods and Who decides how to produce goods and services?services? Businesses decide how to produce goodsBusinesses decide how to produce goods
Who are the goods and services produced Who are the goods and services produced for?for? consumersconsumers
![Page 13: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/13.jpg)
Market EconomyMarket Economy There are no truly pure Market There are no truly pure Market
economies, but the United States is economies, but the United States is close.close.
![Page 14: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/14.jpg)
In a truly free market economy, the government would In a truly free market economy, the government would not be involved at allnot be involved at all There would be no laws to protect workers from unfair There would be no laws to protect workers from unfair
bossesbosses There would be no rules to make sure that credit cards were There would be no rules to make sure that credit cards were
properly protectedproperly protected
Many societies have chosen to have some rules to Many societies have chosen to have some rules to protect consumers, workers, and businesses (MIXED)protect consumers, workers, and businesses (MIXED) These rules reduce the freedoms that businesses have, but These rules reduce the freedoms that businesses have, but
they also protect the workers and consumersthey also protect the workers and consumers
![Page 15: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/15.jpg)
Mixed EconomyMixed Economy Market + Command = MixedMarket + Command = Mixed There are no pure command or market economies. There are no pure command or market economies.
To some degree, all modern economies exhibit To some degree, all modern economies exhibit characteristics of both systems and are often referred to characteristics of both systems and are often referred to as mixed economies. as mixed economies.
Most economies are closer to one type of economic Most economies are closer to one type of economic system than anothersystem than another
Businesses own most resources and determine Businesses own most resources and determine what and how to produce, but the government what and how to produce, but the government regulates certain industriesregulates certain industries
![Page 16: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/16.jpg)
Mixed EconomyMixed Economy Who decides what to produce?Who decides what to produce?
businessesbusinesses Who decides how to produce goods and Who decides how to produce goods and
services?services? Businesses, but the government regulates certain Businesses, but the government regulates certain
industriesindustries Who are the goods and services produced for?Who are the goods and services produced for?
consumersconsumers
![Page 17: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/17.jpg)
Mixed EconomiesMixed Economies Most democratic countries fall in this Most democratic countries fall in this
category (there are no truly pure Market category (there are no truly pure Market or Command economies).or Command economies). Examples: Brazil, Mexico, Canada, UK, US, Examples: Brazil, Mexico, Canada, UK, US,
Germany, Russia, Australia, etc.Germany, Russia, Australia, etc.
![Page 18: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/18.jpg)
Economy ContinuumEconomy ContinuumCommand Market
Cuba Russia Germany USAustralia
UK
![Page 19: Economic Systems](https://reader036.fdocuments.us/reader036/viewer/2022070500/56816842550346895dde156e/html5/thumbnails/19.jpg)
Which Economic System Is Which Economic System Is Best?Best?
Market system has proven to be best Market system has proven to be best because it promotes the goals of growth, because it promotes the goals of growth, freedom, & efficiencyfreedom, & efficiency Citizens are free to own their own property and Citizens are free to own their own property and
use it in the most efficient and profitable wayuse it in the most efficient and profitable way Command and Traditional systems Command and Traditional systems
sometimes offer more security, but are not sometimes offer more security, but are not nearly as strong in efficiency, growth, nearly as strong in efficiency, growth, freedom, and environmental qualityfreedom, and environmental quality