•The process of a nation, or society, follows to produce goods, and services

•Four types (traditional, command, market, mixed)

•IN TRUTH•ALL ECONOMIES ARE MIXED

• Customs decide the what, how, and for whom to produce

• Village life

• Family tradition

•Government answers what, how, and for whom to produce

•Also called Planned Economies

•Individuals answer what, how and for whom

•Government no say

•Free exchange of goods & services

•Adam Smith (1723-1790)

•Explains how market regulates economic activity

•Government not involved

•Purely, people want to fulfill their needs and wants

•Invisible hand•Unaware of selfish actions helping society

•Combines elements of traditional, market and command economic models

• Three main categories of Mixed Economies

1.Authoritarian socialism

2.Capitalism3.Democratic socialism

•Closest to pure Command model

•Communism

•Government owns or controls nearly all of factors of production

•Closest to the Market Model

•Individuals own the factors of production

•Individuals decide the what, how, and for whom

•Government ownership is limited to key areas

•Telephone•electrical

•People influence economic planning through election of government officials