Download Economic Systems

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Traditional
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Command
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Private ownership and enterprise
Socialism
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Some government involvement in a mostly free market system
Capitalism
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Individuals make the decisions about the factors of production, no regulation
Mixed
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Government decides who produces, what they produce, sets prices, distributes resources,
and decides who consumers are, who gets which products & how much they get
Free Market
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Used in small societies
Ritual, habit, or custom (can be barter)
Mixed with a large element of redistribution (“From each according to his ability, to each
according to his needs”, Communist Manifesto)
Communism
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Command
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Complete government control; think: Stalin’s 5-year plans
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Minimum wage is a price floor (gov. sets the lowest wage)
Social Security is an entitlement program
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Many seniors have fixed incomes
Inflation is controlled by either monetary or fiscal policy by the FED
Free enterprise a synonym for free market
Voluntary exchange is the process of consumers and buyers in the free market
Profit and Profit Motive (are you in it for the money?)
Competition (good for the consumer) creates superior products & service and
lower prices
 CONSUMER SOVEREIGNTY
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The Law of Demand states that when prices go up, demand goes down
If consumers don’t want it, no one is going to produce it
If it’s too expensive, we won’t buy it
We have enormous power
MIXED ECONOMY
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Private enterprise with some government regulation
Liberals want more regs/conservatives want fewer regs, in general
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Given that you now understand Consumer
Sovereignty, how does that relate to
decisions made by producers to set pricing
and create new products?