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Economic Systems Mr. Odren

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Economic Systems Mr. Odren Mr. Odren Economic Systems are NOT Political Systems ! ! Countries can have a variety of political systems. They include: Democracy ... – PowerPoint PPT presentation

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Title: Economic Systems Mr. Odren


1
Economic SystemsMr. Odren
  • Mr. Odren

2
Economic Systems are NOT Political Systems ! !
  • Countries can have a variety of political
    systems.
  • They include
  • Democracy
  • Representative Government
  • Communism
  • Monarchy
  • Dictatorship
  • Political Systems are how a countrys government
    is run Economic Systems are how the countrys
    economy is run

3
Economic Systems
  • An economic system describes how a countrys
    economy is organized
  • Because of the problem of scarcity, every country
    needs a system to determine how to use its
    productive resources
  • Scarcity not having enough of something
  • An economic system must answer 3 questions

4
Economic Systems
  1. WHAT TO PRODUCE? (What kinds of goods and
    services should be produced?)
  2. HOW TO PRODUCE? (What productive resources are
    used to produce goods and services?)
  3. FOR WHOM TO PRODUCE? (Who gets to have the goods
    and services?

5
Four Types of Economic Systems
  • 1. Traditional Economy
  • 2. Command Economy
  • 3. Market Economy
  • 4. Most countries are Mixed Economies! (Market
    Command)

6
Traditional Economy
  • An economic system in which economic decisions
    are based on customs and beliefs
  • People will make what they always made will do
    the same work their parents did
  • Exchange of goods is done through Bartering
    trading without using money

7
Traditional Economy
  • Who decides what to produce?
  • People follow their customs and make what their
    ancestors made
  • Who decides how to produce goods services?
  • People grow make things the same way that their
    ancestors did
  • Who are the goods services produced for?
  • People in the village who need them

8
Traditional Economy
  • Examples
  • Amish in America
  • Villages in Africa and South America
  • the Inuit tribes in Canada
  • the caste system in parts of rural India
  • the Aborigines in Australia

9
Command System
  • Government makes all economic decisions owns
    most of the property
  • Governmental planning groups determine such
    things as the prices of goods/services the
    wages of workers
  • This system has not been very successful more
    and more countries are abandoning it

10
Command Economy
  • Who decides what to produce?
  • Government makes all economic decisions
  • Who decides how to produce goods and services?
  • Government decides how to make goods/services
  • Who are the goods and services produced for?
  • Whoever the government decides to give them to

11
Command System
  • Countries with communist governments have
    Command economies
  • Examples There are no truly pure command
    economic systems, but close countries are
    North Korea, former Soviet Union, Cuba, Vietnam

12
Market Economy
  • An economic system in which production and
    distribution questions are answered by prices and
    profits (supply and demand)
  • Most of the resources are owned by private
    citizens
  • Economic decisions are based on Free Enterprise
    (competition between companies)
  • Important economic questions are not answered by
    gov. but by individuals
  • Gov. does not tell a business what goods to
    produce or what price to charge

13
Market Economy
  • Who decides what to produce?
  • Businesses base decisions on supply and demand
    and free enterprise (PRICE)
  • Who decides how to produce goods and services?
  • Businesses decide how to produce goods
  • Who are the goods and services produced for?
  • consumers

14
Market Economy
  • There are no truly pure Market economies, but the
    United States and Hong Kong are close.

15
PURE MARKET ECONOMY
  • In a truly free market economy, the government
    would not be involved at all
  • There would be no laws to protect workers form
    unfair bosses
  • There would be no rules to make sure that credit
    cards were properly protected
  • Many societies have chosen to have some rules to
    protect consumers, workers, and businesses
    (MIXED)
  • These rules reduce the freedoms that businesses
    have, but they also protect the workers and
    consumers

16
Mixed Economy
  • Market Command Mixed
  • To some degree, all modern economies exhibit
    characteristics of both systems and are often
    referred to as mixed economies.
  • Most economies are closer to one type of economic
    system than another
  • Businesses own most resources and determine what
    and how to produce, but the government regulates
    certain industries

17
Mixed Economy
  • Who decides what to produce?
  • Businesses/individuals
  • Who decides how to produce goods and services?
  • Businesses/individuals, but the government
    regulates certain industries
  • Who are the goods and services produced for?
  • consumers

18
Mixed Economies
  • Most democratic countries fall in this category
    (there are no truly pure Market or Command
    economies).
  • Examples Brazil, Mexico, Canada, UK, US,
    Germany, Russia, Australia, Japan, etc.

19
Economy Continuum
Command
Market
Socialism
US
UK
Germany
Cuba
Russia
Hong Kong
20
Which Economic System Is Best?
  • Market based systems have proven to be best
    because it promotes the goals of growth, freedom,
    efficiency
  • Citizens are free to own their own property and
    use it in the most efficient and profitable way
  • Command and Traditional systems sometimes offer
    more security, but are not nearly as strong in
    efficiency, growth, freedom, and environmental
    quality
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