Economic SystemsO The way in which nations decide what to produce, how

to produce it, and for whom it is made.

Basic Economic Questions

1. What goods and services will be produced?2. How will goods and services be produced?3. From whom to produce? (Who will

consume the goods and services?

Economic SystemsHow does each of the economic systems answer the

three basic economic questions?

SS6E5: The student will analyze different economic systems.

a. Compare how traditional, command, and market economies answer the economic questions of 1: what to produce, 2: how to produce, and 3: for whom to produce

Mixed Economies1. There are no pure command or market

economies.2. All modern economies have characteristics

of both command and market systems. (Mixed economy)

3. In a market economy, you have laws to protect workers and consumers.

Traditional EconomyFound in rural, non‐developed countries

BasicEconomic Questions

What goods and services will be

produced?

How will goods and services be

produced?

From whom to produce? (Who

will consume the goods and services?

Answer • Customs and habits of the past are used to decide what will be produced.

• What people need to survive

• Jobs are handed down from generation to generation.

• Hunting, farming and gathering

Make their own products for themselves

Command EconomyBasic

Economic Questions

What goods and services will be

produced?

How will goods and services be

produced?

From whom to produce? (Who

will consume the goods and services?

Answer • Government decides what will be produced.

• Workers are told what to produce and how much to produce in a given time.

Government does the planning.

• Government decides

• Expectation –everyone in country has goods they need when they need them.

Market EconomyBasic

Economic Questions

What goods and services will be

produced?

How will goods and services be

produced?

From whom to produce? (Who

will consume the goods and services?

Answer • Whatever consumers will buy

• Success of a good or service determines whether it will be produced

• Individuals or corporations decided

• Goal is the most efficient and profitable methods.

• Whoever can buy it

Other names: capitalism, free enterprise, laissez-faireMost of Europe operates in a market economy.“Free” means that businesses can operate without too many rules from the government.