Economic Systems Traditional Economy In traditional economy skills

Economic Systems

Traditional Economy • In traditional economy skills are passed from parents to children. Tools are simple and powered by human or animals. • Some societies in Africa, Asia, and Latin America still have a sizeable traditional economies, where goods are made by hand.

The Market System • In the market system goods and services are bought and sold in a market. • Businesses are privately owned, and business people produce for profit. • The market system is also called capitalism. • The US, Europe, and Japan are all market systems.

Command Economy • In a command economy factories and farms are owned by the government. • Central planners make the basic economic decisions. • Command economies are also called communism. • The Soviet Union, China, and Cuba were

Mixed Economies • In reality most societies have mixed economies, using some markets and some government control. • Countries with larger markets are referred to as capitalist, while countries with larger government sectors are often called socialist.

Economic Systems Spectrum

Democratic Socialism • The term entered our political discussion with the candidacy of Bernie Sanders. • For Sanders, Democratic Socialism, refers to a policy of narrowing the gap between rich and poor, providing universal health care through the government, and providing free college. • The term is most often used in relationship to Western European countries, like Sweden, who provide “cradle to grave social services” Critics point out that these societies have higher taxes. • These are democratic countries, as opposed to totalitarian communist nations with one party rule.

Which do you like best? • Discuss with your partner which economic system you like best. • Are there aspects of different systems that you would like to combine. • Do you think Americans understand will vote for a Democratic Socialist, like Sanders? Why or why not?

A Doctor’s Diagnosis • How does the doctor decide if a patient is healthy or sick? • What things would a Dr. do at a check up?

An Economist’s Diagnosis • How would an economist decide if an economy is healthy or sick? • What indicators do they use to evaluate economic performance?

Economic Goals • Economists use Gross Domestic Product (GDP) to measure if the economy is growing. • They track the unemployment rate to see how many people are working or unemployed. • They trace the general rise or fall in prices over time, called the inflation

Social Goals • In a market economy people value economic freedom. • However, we are also concerned with equity to insure that goods and services are distributed fairly. • And we value economic security, especially for the unemployed and senior citizens.

Capitalism • The capitalist economic system is characterized by: • Economic freedom • Voluntary exchange • Private property rights • Profit Motive • Competition

Entrepreneurs • Entrepreneurs are business people • They start businesses with the goal of making a profit. • Many fail, but some succeed in building successful enterprises. • Bill Gates and Steve Jobs are famous computer entrepreneurs.

Consumers • People who buy goods and services are consumers. • Consumer tastes and preferences for goods play a crucial role in determining which goods are successful in the market. • Consumer Sovereignty means that consumers decide what is and isn’t

The Role of Government • Government has an important role to play, although it doesn’t run the market. • Government makes sure that businesses play by the rules. It regulates businesses to insure public safety. • In some cases government provides goods such as parks,