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
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