The Nature of Economic SystemsLESSON 9 | PP. 84-87

Economic System

A structure of governance that deals with the different economic activities

to answer the basic questions on the needs of the economy.

Traditional Market Command

ECONOMICSYSTEMS

TRADITIONALEconomy

ROLES

INDIVIDUAL

Decide

Society basesEVERYTHING on traditions.

TRADITIONS

Traditional Economy

EXAMPLE: A farmer engaged in

the production of rice did exactly what his father did when he was also planting rice before.

Does not require progress

Using methods used by his ancestors

Traditional Economy

The SOCIETY decides, not the INDIVIDUAL.

MARKET

ECONOMY

FeudalismMercantili

smCapitalism

WHAT?HOW? FOR

WHOM?

MARKETArrangement between the

SELLERS and the BUYERSto make a TRANSACTION.

Market Economy

Indicator:

CONSUMER’S

DEMAND

HIGH PRICE=In demand

=increase production

LOW PRICE= not in demand

=decrease produuction

FEUDALISM1

Fief ManorSerf

Feudal LordVassals

Feudal LordVassals

FIEF

Service

LAND

Manorial System

Manor•Center of agricultural economy

Serf• slaves

Feudalism

The basis of man’s POWER depends on

the ownership of extensive land.

MERCANTILISM

BRITAIN FRANCE

SPAIN NETHERLANDS

Gold & Silver measures power & Supremacy.

CAPITALISM

Capitalism

Ownership forProduct

ion

Land

Capital

Entre-prene

ur

LaborPrivate Property

Profit Motives

Foundations:

Free Enterprise orFree Market System

AKA:

“Property is allowed without limitations”

Ownership of Resources & Wealth1

“Decision-making is DECENTRALIZED”

Decision-Making11

“Pricing depends on the prevailing price in the MARKET”

Pricing111

CommandEconomy

Communism

Socialism

Facism

Command EconomyAll economic activities

are planned by

authority.

Command Economy

Government owns and controls all factors for production.

Individual preferences are not considered

PRINCIPLE: Interests of society

should prevail over that of the individuals.

Communism

Father of CommunismKarl Marx

EQUALITY

CLASSLESS SOCIETY

Communism

Father of CommunismKarl Marx

“From each of us according to

abilities, to each of us according to

needs.”

Communism

Father of CommunismKarl Marx

The STATE owns ALL the

RESOURCES of the country.

PrivateProperty

Socialism

Capitalism CommunismPrivate Property

Private Property

? ? ?Main

industries controlled by

the state

Individuals own small industries

Facism

Capitalism DictatorIndustries are

controlled/owned by the state

under a

Facism

“The people are for the state, not the state for the

people.”

Economic Systems

Traditional Market

Feudalism|Land & Service|

Mercantilism|Gold & Silver|

Capitalism|Private Ownership|

Command

Communism|State Ownership|

Socialism|Private & State|

Facism|Dictator|