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Economic Systems
BBI2O
Economic System
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The way government works with business
Three key economic questions:
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What goods and services should be produced?
How should these goods and services be
produced?
For whom should these goods and services be
produced?
Two basic economic approaches
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Command Economy
Market Economy
A Pure Command Economy
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The government is in complete control
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Owns all the natural resources, farms, factories,
and most businesses
Makes all economic decisions (and is solely
responsible for answering the “economic
questions”)
Controls wages, benefits, etc.
Ex: Communist system
A Pure Market Economy
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Also known as Free Market, Free Enterprise,
or Capitalism
Buyers and sellers direct the economy
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Supply and demand provide the answers to the
“economic questions”
Key concepts:
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Profit
Competition
Private Property
A Pure Market Economy
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Business is free to choose what type of
good/service it will sell, where it will operate,
and is free to make a profit
Consumers are free to buy what they want,
from whom they want
The Mixed Economy
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No modern economy operates in a “pure”
form – they are all a mix of command and
free market
USA
Free Market Economy
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Sweden
North Korea
Command Economy
How much the government is involved in the
economy determines where on the continuum
it sits
Canada
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In what ways are we a mixed economy?
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What elements of a Free Market economy do we
have?
What elements of a Command economy do we
have?
Gross Domestic Product
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The “GDP”
A measure of output (and of the strength of a
country’s economy)
The total value of all the goods and services
produced in a country in a given period of
time
Gross Domestic Product
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Example:
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The USA’s GDP is about $14.6 Trillion
Canada’s GDP is about $1.5 Trillion
Norway’s GDP is only $413.5 Billion
Does this mean that the Americans manage
their economy 35 times better than Norway?
Why might this not be a fair comparison?
GDP Per Capita
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A Country’s GDP divided by the population
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The USA’s GDP per capita is $47,100
Canada’s GDP per capita is $46,300
Norway’s GDP per capita is $88,400
Is this a more accurate measure of a
country’s economy?
Sectors of the Economy
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Agriculture
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Industry
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i.e. farming
i.e. manufacturing
Services
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Examples: education, medical, legal, consulting,
tourism, etc.
Exports and Imports
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Exports:
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Imports:
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Things that a country produces and sells to
buyers in other countries
Things that a country brings in from other
countries
What are some of Canada’s imports and
exports?