Download Types of Economic Systems

Types of Economic Systems
Supply and Demand
Price
Supply and Demand
• Demand – the amount or quantity of goods
and services that consumers are willing to buy
at various prices
• Supply – the amount of goods and services
that producers will provide at various prices
• Equilibrium price – where quantity demanded
and quantity supplied meet
Demand Curve for new iPhone 5
1200
Price per phone $
1000
800
600
400
200
0
1
2
3
4
5
6
7
8
Numbers of phones demanded (in thousands)
9
10
Supply Curve for new iPhone 5
$900.00
$800.00
Cost of iPhone
$700.00
$600.00
$500.00
$400.00
$300.00
$200.00
$100.00
$1
2
3
4
5
6
7
8
Number of phones demanded (in thousands)
9
10
Market Economy
• Economic decisions are made in the
marketplace according to the laws of supply
and demand
• Marketplace – anywhere money changes
hands
• Also called – private enterprise system;
capitalism
– Resources privately owned
– You decide how to run business; what to sell; what
to charge; where to shop
Command Economy
• A central authority makes the key economic
decisions; usually the government or state
• Also called planned or managed economy
• A strong command economy is known as
communism-state makes all economic decisions
and controls all resources for the common good
• A moderate command economy is known as
socialism-state owns major resources and makes
key economic decisions
– Some form of private enterprise; individuals may own
some businesses
Mixed Economy
• A combination of market economy and
command economy
• State (government) takes care of people’s
needs while the marketplace takes care of
people’s wants
• U.S. has a mixed economy
– Government – defense, education…
– Marketplace – cars, computers, fast food…