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III. Economic Systems
•Every single society has an economic system.
• The purpose of an economic system is to make and distribute goods and services.
• The roles of individuals, businesses, and government vary in each system.
• There are four basic economic systems: Traditional, Market, Command, and Mixed
Traditional Economies
•An economy where people make economic decisions based on their customs and habits.
• needs and wants are usually established through hunting and farming.
• This is usually the traditions of their ancestors
• Culture is seen as more important than having a strong economy
•People in traditional economies usually do not want to change their basic way of life.
• In today’s world, traditional economies are not common
Market Economies
•An economy in which individual consumers and producers make economic decisions
• This type of economy is also called capitalism, or free market.
• Encourages people to start new businesses by giving them economic freedom
Command Economies
•In this form of government, the central government makes all economic decisions
• also called a centrally planned economy
• little or no economic freedoms for individuals
• producers and consumers make very few basic economic decisions
Mixed Economy
•In reality pure market or command economies do not exist
• most societies have mixed economies – different levels of government control
• combines different elements of traditional, market, and command economic systems
•The United States has about the closest thing to a pure market economy
• However, it is still considered a mixed economy because of minor government regulations
• For example, the government passes laws to protect the rights of consumers
• The government also influences economic growth through jobs and services
•Countries like North Korea have as close to a pure command economy as you can get, but are still considered mixed.
• The government controls almost all economic decisions.