Traditional, Market, Command, Mixed

Non West Studies 2014

Economic Systems

Economies vary when it comes to government involvement. The relationship between government and the economy has been debated since America’s historical beginnings.

Main Idea

Scarcity refers to the limited supply of something• Every country must deal with the problem of scarcity since no country has everything that its people need/want

Every country must develop an economic system to determine how to use its limited resources to answer the three basic economic questions:•What goods/services will be produced?•How will goods/services be produced?•Who will consume the goods/services?

The way a country answers these questions determines its economic system

D

Different Economic Systems

A. Economics – the social science that analyzes the production, distribution, and consumption of goods and services.

B. Many different economic systems in the world

C. Helps formulate our understanding of Modern American History

Economic Systems

What role should government play in the economy?

Essential Question

The major economic systems are traditional economy, market economy, command economy and mixed economy.

There are also countries that are said to have developing economies, moving from a traditional to a market economy.

Economic Systems

• An economic system in which economic decisions are based on customs and beliefs

• People will make what they always made & will do the same work their parents did

• Normally used to describe economic systems that pertain in societies with extensive subsistence agriculture

• Used by members of industrialized societies to describe societies deemed "underdeveloped"

Traditional Economy

Examples:•Villages in Africa and South America • the Inuit tribes in Canada• the caste system in parts of rural India• the Aborigines in Australia

Traditional Economies

Market Economy• An economic system in which

economic decisions are guided by the changes in prices that occur as individual buyers and sellers interact in the market place

• Most of the resources are owned by private citizens

• Economic decisions are based on Free Enterprise (competition between companies)

• Important economic questions are not answered by government but by individuals

• Government does not tell a business what goods to produce or what price to charge

Market Economy

Market Economy

• If an economy was pure market, people could sell anything, even things that could hurt others.

• Businesses could make things cost as much as they wanted.

• In order to make products cheaper, they could skimp on safety and benefits for workers.

“Pure” Market Economies

• One of the freest economies in the world

• It is technically a mixed economy, but it’s close to market because there are very few rules to restrict the market

• Government does not own major industry or business

• Prices are set by the agreement of buyers and sellers rather than by government rules

Australia’s Economy

• Government makes all economic decisions & owns most of the property

• This system has not been very successful & more and more countries are abandoning it

Command Economy

Command Economy

• If government controlled everything in the economy, then having a diversity of products would be very difficult.

• With no private businesses, there would be no competition, and products would never improve.

• The government could make the economy exploit the poor and benefit the rich.

“Pure” Command Economies

You and your partner discuss it.

What toppings do you like on an ice cream sundae?• Plain Vanilla?• Or absolutely everything (and I mean everything)?

What Do You Like on a Sundae?

Chances are, you were somewhere between plain and everything.

When discussing economies, most countries are somewhere in between too.

When a country is not completely a command economy and not completely a market economy, but somewhere in between, it is called a Mixed Economy.

What Do You Like on a Sundae?

Most Countries Lie Somewhere in Between

-However, they may be closer to one side than the other.

Mixed Economies

Mixed Economy

Why do most countries have a mixed economy?

Essential Question

•A combination of market, command, or traditional economy.•A system in which free enterprise is affected by government regulations.•Many societies have chosen to have some rules to protect consumers, workers, and businesses •Rules reduce the freedoms that businesses have, but they also protect the workers and consumers

Mixed Economy

Most democratic countries fall in this category (there are no truly pure Market or Command economies).

•Examples: Brazil, Mexico, Canada, UK, US, Germany, Russia, Australia, etc.

Mixed Economies

Economy Continuum

Command

Market

Cuba Russia

Germany

USAustralia

UK