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Types of Economic Systems

Economic System Traditional Economy Command Economy Market Economy Mixed Economy

Terms to Know

Economic System – way of determining how to use resources to satisfy people’s wants and needs

Are your needs the same as someone in Israel? Do you want the same things as someone in China? There are different economic systems to meet the

different needs and wants of the people.

Intro to Economic Systems

Every economic system must answer three basic questions:

What goods and services should be produced? How should they be produced? Who will get the goods and how will they be

distributed?

Three Basic Economic Questions

Traditional System is based on traditional customs and religious beliefs passed down for generations.

Command System is when the government controls all factors of production and makes all the decisions

The government even decides what jobs people will hold

Types of Economic Systems

Market Economy (also known as Capitalist)- the government does not intervene. Market is freely chosen activities between buyers and sellers of goods and services.

Mixed Economic System – a combination of all three types of economic systems

Types of Economic Systems

Some decisions are made by individuals reacting to the market

Squinkies Ipods

Federal, state, and local governments make laws regulating areas of business.

Health Inspectors Commercial zones – not shopping centers in a

neighborhood Customs and traditions affect portions of the

economy Christmas, Valentines Day, etc.

In The United States…

Gross Domestic Product (GDP) – the market value of all final goods and services within a country in a given period of time.

Refers to products produced and sold in the same country Hershey is an American candy company, so every

Hershey product made & sold in the U.S. is part of it’s GDP.

Gross National Product (GNP) – the total value of all final goods and services produced by a country’s factors of product and sold on the open market in a given period of time.

Refers to product in one country & sold in another Example: Any Hershey bars sold in Mexico will count

towards the U.S.’s GNP

GDP vs. GNP

http://www.youtube.com/watch?v=1ZTRH-bFomI&feature=related 

http://www.youtube.com/watch?v=_hu9i2C7cK8&feature=related

http://www.youtube.com/watch?v=bvdN0IGoHSU&feature=related

Kingdom of Mocha

Typically a government follows one of four types of economic systems: traditional, command, market, and mixed. Explain how each system answers the basic economic questions of what to product, how to produce, and whom to produce for. Include details and examples to support your response.

ECR

Traditional Economy What goods and services should be produced?

Example How should they be produced?

Example Who will get the goods and how will they be distributed?

Example Command Economy

What goods and services should be produced? Example

How should they be produced? Example

Who will get the goods and how will they be distributed? Example

Market Economy What goods and services should be produced?

Example How should they be produced?

Example Who will get the goods and how will they be distributed?

Example Mixed Economy

What goods and services should be produced? Example

How should they be produced? Example

Who will get the goods and how will they be distributed? Examplle

ECR Outline