There are three basic economic questions that all
There are three basic economic questions that all nations and societies must answer. 1. 2. 3. What to produce How to produce For whom to produce
The nation’s or society’s response to the three economic questions is determined by its economic system.
The 4 Economic Systems 1. 2. 3. 4. Traditional Command Market Mixed
Traditional Economic Systems An economic system based upon customs and traditions. Economy is based upon agriculture and hunting. The answers to the three economic questions are based on the ways or customs of doing things that have been handed down from generation to generation.
What to produce? 2. How to produce? 3. For whom to produce? 1.
Command Economic Systems in which the government or central planners control the factors of production and answer most of the economic questions
What to produce? 2. How to produce? 3. For whom to produce? 1.
Market Economic Systems, Systems in which most of the basic economic questions are answered by producers and consumers acting freely. Individuals own the factors of production and make economic decisions based on supply and demand. The government has little intervention.
What to produce? 2. How to produce? 3. For whom to produce? 1.
Mixed Economic Systems that combine characteristics of the traditional, market, and command economic systems. Today, all major economies are mixed.
Most market economies today have five major characteristics. 1. 2. 3. 4. 5. Private ownership of property Individual initiative or entrepreneurship Competition Freedom of choice Profit motive
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