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Standard 1Understand the fundamental
concepts relevant to the development of a market
economy
SS.912.E.1.3SS.912.E.1.3Compare how the various economic Compare how the various economic
systems (traditional, market, command, systems (traditional, market, command, mixed) answer the questions: (1) What to mixed) answer the questions: (1) What to produce?; (2) How to produce?; and (3) produce?; (2) How to produce?; and (3)
For whom to produce?For whom to produce?
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Characteristics of economic systems:Characteristics of economic systems:
TraditionalTraditional– Private property rights usually existPrivate property rights usually exist– Limited trading; usually barter tradeLimited trading; usually barter trade– Minimal use of price system or currencyMinimal use of price system or currency
MarketMarket– Private property rights are predominantPrivate property rights are predominant– Extensive tradingExtensive trading– Heavy emphasis on price systemHeavy emphasis on price system
CommandCommand– Private property rights are limited, at bestPrivate property rights are limited, at best– Moderate tradingModerate trading– Limited use of price systemLimited use of price system
MixedMixed– Various combinations of market and commandVarious combinations of market and command
TraditionalTraditional(1) What to produce?(1) What to produce?
Whatever is needed or desired by the householdWhatever is needed or desired by the household
(2) How to produce?(2) How to produce?
With the resources owned by the householdWith the resources owned by the household
Some borrowing or trading with neighborsSome borrowing or trading with neighbors
(3) For whom to produce?(3) For whom to produce?
The householdThe household
Perhaps some for tradingPerhaps some for trading
MarketMarket
(1) What to produce?(1) What to produce?
Whatever is desired by consumersWhatever is desired by consumers
(2) How to produce?(2) How to produce?
The most efficient and inexpensive wayThe most efficient and inexpensive way
(3) For whom to produce?(3) For whom to produce?
Whomever has the ability to payWhomever has the ability to pay
CommandCommand(1) What to produce?(1) What to produce?
Whatever the government decidesWhatever the government decides
Presumably some consumer demand is Presumably some consumer demand is consideredconsidered
(2) How to produce?(2) How to produce?
With the existing technology and resourcesWith the existing technology and resources
Much less incentive to innovate and reduce Much less incentive to innovate and reduce costscosts
(3) For whom to produce?(3) For whom to produce?
Whomever the government decidesWhomever the government decides
Whomever waits in lineWhomever waits in line
MixedMixed
Various combinations of market and Various combinations of market and commandcommand
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IndiansIndians
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