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Economics: SS7E1 The student will … Analyze different economic systems • • • Traditional Economy Command Economy Market Economy TSW… Compare how traditional, command, and market economies answer the economic questions, such as: What to produce? How For to produce? whom to produce? Traditional Economy Tradition means something that has been passed down in a culture from one generation to another. Most economic decisions are based on custom and habit (hence the word “traditional”). People mainly produce goods for their own families and neighborhoods. People barter or swap goods. In a traditional economy… Everything operates on a small, rural basis. In a traditional economy… Consumers and producers make the decisions about what to produce and how to produce it. It becomes a problem if people begin to want and need products that can’t be made or traded locally. Command Economy Centralized - government directed “commanded” economy A central governmental planning group makes most of the economic decisions. They decide Which goods and services will be produced. The prices that will be charged for the goods and services. Wages to be paid to the workers. What jobs the workers will do How and where the goods will be produced. Command Economy A small group of people decide. This small group commands the economy. Command Economy How are decisions made? Government Planners What problem can occur in a command economy? People must secure government permission to start a new business. Market Economy Individuals make the decisions about what to produce and what to buy. Other names for a market economy are…. Capitalism Free enterprise Laissez-faire (french please) phrase for allows them to do as they Market Economy Who makes the decisions in a market economy? Individuals Market Economy Who takes the financial risk in starting a new business in a market economy? Individual business people Mixed Economies Almost all modern economies in the world today have characteristics of all three types of economic systems. In other words, they are a mixture of economies. Mixed Economies Why are most modern economies referred to as mixed economies? Most countries have aspects of all three economic types at work in their economies. Why do most economies in the world operate between a market economy and a command economy? Most countries have found they need a mixture of control to be successful and protect consumers.
