Types of Economies Traditional Economy In a traditional

Types of Economies

Traditional Economy • In a traditional economy, roles and decisions are decided upon by custom • Each person plays a specific role • Some examples are: the Australian Aborigines, and northern Canada’s Inuits

Traditional Economy • Advantages: everyone knows which role to play and there is little uncertainty about WHAT, HOW, and for WHOM to produce. • Disadvantage: is the discouragement of new ideas and new ways of thinking. This leads to a lower standard of living than in other societies.

Question: • How would your life be different if you were living in a traditional economy?

Command Economy • In the command economy, a central authority (the government) determines WHAT, HOW, and FOR WHOM to produce • Command economies include: North Korea, Cuba, the former Soviet Union and the People’s Republic of China.

Command Economy • Advantages: – The ability to drastically change direction in a relatively short period of time. – Many basic health and public services are available at little or no cost

Command Economy • Disadvantages: – Consumer needs may not be met – Hard work is not rewarded – The necessary decision-making bureaucracy delays decisions – Little flexibility to deal with day-to-day problems – Individual initiative goes unrewarded

Market Economy • In a market economy, producers and consumers determine WHAT, HOW and FOR WHOM to produce. In each market transaction, the consumers dollar acts like a “vote” making sure that producers continue to provide the goods and services that consumers want to buy.

Market Economy • Examples of countries with a market economy: Japan, Canada, the United States, South Korea, Singapore and parts of Western Europe.

Market Economy • Advantages: – Ability to adjust to change – Individual freedom – Minimum amount of government involvement in economy – Ability to have a voice in economy – Variety of goods and services provided – Great consumer satisfaction

Market Economy • Disadvantages: – Inability to meet every person’s basic needs – Inadequate job of providing some highly valued services such as justice, education and health care – High level of personal uncertainty – Sometimes economic failure

Question: • Which economy do you believe is best and why?