Economics Chapter 2 Section One Economic Systems Systems

Economics Chapter 2 Section One Economic Systems

Systems • Economic Systems • Organized way of providing for the needs and the wants of the people • Traditional, Command, and Market Economies • Traditional Economies • Stem from the traditions and customs of groups of people • Amish, Quakers

Traditional Pro’s and Con’s • Pro’s • Everyone knows their Role • What, How and for Whom are pretty easy to answer • Con’s • Lack of new ideas and advances • Lowers standard of living • Stagnation

Command Economies • Central Authority makes all the decisions on the Economic Questions • Pure Command the group is the Government • EX) Soviet Union, Cuba, North Korea • Authoritarian usually involving a dictator

Pro’s and Con’s Command Economies • Pro’s • Emphasizes equality • Growth of heavy industry • Industry that makes for other industry • Health and Public services available at little to no cost • Con’s • Ignore basic wants and needs of consumers • Little incentive for people to produce • Too large of a decision making body, can lead to corruption, greed • Lack of individual reward

Market Economies • People, instead of Government, make decisions in their own best interest • Markets • Arrangements that allow buyers and sellers to exchange goods and services • Freedom? • True free Market economies have a great deal of freedom • Capitalism • Private citizens owning the factors of production

Pro’s and Cons of the Free Market • Ads • High degree of individual freedom • Is able to gradually adjust to change over time • Little to no governmental interference • Cons • No safety nets for individuals • Does not always supply some basic goods and services • Roads, education, health • High Degree of Uncertainty

Mixed Economies • Systems that provide elements of all three types of Economies • The U. S. is a mixed economy • Socialism • Economic and Political System where the gov. controls some but not all of the productive resources • Communism • Political and Economic system where all property is owned collectively • Government involvement leads to a command economy

Ad’s and Dis of Market Economies • Ads • Provides assistance to all people, safety nets • Voters can choose the best people to answer the economic questions • For Whom is answered more directly • Dis • Possibility of higher costs overall • Taxes • Services may be limited or deteriorate over time • Socialism and communism tend to be less efficient