Economic Systems What is an Economic System Roles

Economic Systems What is an Economic System?

Roles within an economy Firms: Decide what to produce and who to hire. Households: Decide what to buy and who to work for. Markets: Place where goods and services are exchanged. Factors of Production: Land, labor, capital, and entrepreneurship.

Circular Flow

Economic Systems Economic System: They way a country manages and distributes resources. All countries have that circular flow, but how the flow specifically looks and the direction the flow takes may change.

Command Economy A system where the government determines what goods should be produced, how much should be produced and the price at which the goods will be offered for sale. -Examples?

Market Economy “A system of society-wide coordination of human activities not by central command but by mutual interactions in the form of transactions. ” -Examples?

Supply & Demand • Backbone of the Market Economy • Supply = how much of a good or service is available • Demand = how much of a good or service is wanted by consumers • The market is driven by competition

Mixed Economy Government controls vital aspects of the economy. Consumers and producers agree on how much to produce in all other sectors. -Examples?

A New Nation You’re leader in a new nation. -Which economic system will you adopt? Why? -Fill in the circular flow diagram: which way will your flow go?