Economic Systems Types of Economic Systems Traditional Economic

Economic Systems Types of Economic Systems

Traditional Economic System Based on beliefs, customs and ways of doing things handed down from generation to generation Developed out of cultural and religious values Most are outgunned by stronger financial, political and military forces Ex: Middle East, Rural parts of Africa and Latin America

Command Economic System Government controls the factors of production and makes all decisions about their use Ex: Former Soviet Union, North Korea Socialism is part of command economy - government manages some business Communism is also part of command economy - resources owned by govt. , govt. plans use of all resources, govt. controls all businesses

Market Economic System Individuals own the factors of production and make economic decisions through free interaction The government does not intervene Also called a capitalist economy Ex: United States, Germany Also called a mixed economy because the government controls some industry

6 Major Characteristics of a Market Economy 1. Little or no government control 2. Freedom of enterprise- people are free to own and control factors of production 3. Freedom of choice- buyers make decisions on what should be produced 4. Private Property- individuals or groups own it 5. Profit incentive- desire to make a profit, people are moved to make products people want 6. Competition- rivalry among producers or sellers of similar good to win more business

What system is the United States? Some argue that we are a market economy We do not have a pure market economy We have a mixed economy (govt. controls some industry) Mixed- combining characteristics of more than one type of economy U. S. examples Market- malls, restaurants, entrepreneurship Command- minimum wage, labor laws, martial law Traditional- “blue laws” restricting activities or sales of goods on Sunday