ECONOMIC SYSTEMS ECONOMIC SYSTEMS A NATIONS WAY OF

ECONOMIC SYSTEMS

ECONOMIC SYSTEMS: A NATION’S WAY OF PRODUCING THINGS ITS PEOPLE WANT AND NEED • Different types of economic systems: Market, Command, & Mixed • Three basic questions: What to produce, how to produce, and for whom to produce. • Each economic system answers these questions differently.

MARKET ECONOMIES • All questions are answered by the market---they are decided by businesses and consumers. • Laissez-faire economics – belief that the government should not interfere with the economy. • Characteristics: • Individual freedom • Competition • Some dealing with externalities • Higher GDP

COMMAND ECONOMIES • All questions are answered by the government. • Characteristics: • Socialism – “Diet Communism” – The factors of production should be owned by society, either directly or through the government. This should make wealth more equal among citizens. • Communism - All property has shared ownership, equal distribution of wealth among citizens. • Government Control • Slow Growth – lower GDP (ex: North Korea)

MIXED ECONOMIES • Most countries actually have a mixed economy. • Individuals are free to make economic decisions, but are subject to some government regulations. • Sometimes the government even participates as part of the economy! • Postal Service, highway system