Economic Systems Traditional Command Market Mixed Economic Systems

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Economic Systems Traditional - Command – Market - Mixed

Economic Systems Traditional - Command – Market - Mixed

Economic Systems - Traditional Oldest and simplest form of an economic system. • Tribal

Economic Systems - Traditional Oldest and simplest form of an economic system. • Tribal – Family Units • Rely on habit, custom, or ritual. (work divided among gender lines) Slow to adapt to new ideas or technology Lack modern conveniences Low standard of living

Economic Systems Two Broad Categories: • Market Economy (Capitalistic) • Command Economy (Centrally Planned)

Economic Systems Two Broad Categories: • Market Economy (Capitalistic) • Command Economy (Centrally Planned) NOTE: No country has a pure Market or pure Command Economy…. all are mixed. Command Market

Economic Systems How do we determine, or measure, the type of economic system you

Economic Systems How do we determine, or measure, the type of economic system you have? Three Questions are asked: • What goods and services are produced? • How should these be produced? • For Whom should these be produced?

Economic Systems Market Economy

Economic Systems Market Economy

Economic Systems - Market 1 st Question • What goods should be produced? Consumers

Economic Systems - Market 1 st Question • What goods should be produced? Consumers decide Private businesses form to meet consumer’s wants and needs. If consumers don’t want it, it won’t be produced.

Economic Systems - Market 2 nd Question • How should goods be produced? Businesses

Economic Systems - Market 2 nd Question • How should goods be produced? Businesses decide. They must compete with other companies and products. The individual companies must find the most efficient way to produce to be able to succeed.

Economic Systems - Market 3 rd Question • For Whom should goods be produced?

Economic Systems - Market 3 rd Question • For Whom should goods be produced? For whomever can afford it. If you do not have money you cannot buy the good. TOO BAD. Nobody is entitled to goods or services. To be able to buy goods, people are motivated to work and earn money.

Economic Systems Command Economy

Economic Systems Command Economy

Economic Systems - Command 1 st Question • What goods to produce? Government decides.

Economic Systems - Command 1 st Question • What goods to produce? Government decides. Government chooses what is important to spend their resources on. EX: military vs. furniture. Thus, shortages will exist for goods that aren’t deemed important by government

Economic Systems - Command 2 nd Question • How should goods be produced? Government

Economic Systems - Command 2 nd Question • How should goods be produced? Government decides. Govt owns the means of production. They employ workers and control industry They set wages and determine schedules. No bargaining or competition.

Economic Systems - Command 3 rd Question • For Whom should goods be produced?

Economic Systems - Command 3 rd Question • For Whom should goods be produced? Government decides who gets what and how much. All people share equally in wealth. Every one has basic needs met. Govt provides housing (dictates where to live), provides food (decides what to eat), provides jobs (determines where to work)

Economic Systems (REVIEW) Two Broad Categories: • Market Economy (Capitalistic) • Command Economy (Centrally

Economic Systems (REVIEW) Two Broad Categories: • Market Economy (Capitalistic) • Command Economy (Centrally Planned) NOTE: No country has a pure Market or pure Command Economy…. all are mixed. Command Market

Economic Systems - MIXED All economic systems are Mixed. To what degree? Three Models

Economic Systems - MIXED All economic systems are Mixed. To what degree? Three Models (philosophies) • Capitalist Model • Socialist Model • Communist Model Command Communist Market Socialist Capitalist

Economic Models – Capitalist Same as Free Enterprise • Characterized by “self-interest” and “competition”

Economic Models – Capitalist Same as Free Enterprise • Characterized by “self-interest” and “competition” • Self-Interest is the motivating force in the free market. Because government does not “provide” for people but allows them to purchase and own what they want, individuals are motivated to work to earn money for purchases.

Economic Model - Capitalism Competition exists in a free market system as businesses struggle

Economic Model - Capitalism Competition exists in a free market system as businesses struggle to gain dollars from consumers. As business compete for profit, the free market is “regulated” through company’s incentive to lower prices and provide better products.

Economic Model - Socialist • Government reduces difference between rich and poor. (Classless system)

Economic Model - Socialist • Government reduces difference between rich and poor. (Classless system) • Key industries run by government (control prices / provide employment) • Provide services for all. “Cradle to Grave” • High taxes needed to provide services

Economic Model - Socialist This model believes there should be one class. Socialist also

Economic Model - Socialist This model believes there should be one class. Socialist also believe that all people should have services provided for them…health care, schooling, pensions. (Cradle to grave coverage) To do this, those who make money are taxed heavily to “redistribute wealth” and provide all with services. Businesses highly regulated (vacations, hours, etc)

Economic Model - Communist • Government runs everything. • All people are assigned jobs

Economic Model - Communist • Government runs everything. • All people are assigned jobs / school • Housing assigned according to need • Medical care is free • Government determines products

Economic Model - Communist This system provides no incentive to work and earn money

Economic Model - Communist This system provides no incentive to work and earn money as the government dictates what you make and were you work. Additionally, you are provided for if you do not work. System fails as there is no competition to improve technology or efficiencies. Privatization happens (allowing businesses to be privately owned…not govt owned)

Economic Systems - MIXED Communist Socialist Command ong Hon g. K Uni Canted S

Economic Systems - MIXED Communist Socialist Command ong Hon g. K Uni Canted S ada tate s Jap an ny ma Ger nce Fra Rus Chi sia na a Cub Nor th K ore a All economic systems are Mixed. Capitalist Market Economic Freedom Index