Warm-up: Wednesday
• Write down 3 characteristics of the
economic system you studied yesterday.
Economic Systems
• Economic geography deals with how
people earn a living and use resources.
• Today, we will learn about 3 types of
economic systems that are used in
different countries.
Economic Systems
Command
(Planned)
Communism
Socialism
(Free)
Market
Capitalism
Traditional
Important Note:
• No country has a pure market, command,
or traditional economy. Most places have
mixed economies.
Economic Questions
1. What and how many goods/services will
be produced?
2. How will these products be produced?
3. How will the products be distributed?
4. Where are these economies located?
Market Economy
1. What and how many goods/services
will be produced?
•
People (consumers) determine what and
how many products will be produced
based on buying power and lack of
buying power.
Market Economy
2. How will these products be produced?
Based on consumer needs. (Goods
produced by private industries and limited
government involvement.)
Free enterprise = lets competition among
businesses determine the price of
products
Market Economy
2. How will these products be produced?
-Commercial Agriculture
-Commercial Industries: Goods are massproduced in factories for sale by
businesses to consumers
Market Economy
3. How will the products be distributed?
•
Based on consumer needs and supply
and demand. People freely choose what
to buy and sell.
Market Economy
4. Where are these economies located?
• United States, throughout Europe
• Most of the world’s rich countries
(developed) have market economies
Example of a market economy:
Capitalism - businesses, industries, and
resources are privately owned
Which is a central characteristic of a free market
economy?
A. The government owns the means of
production
B. All wage earners are paid the same
amount
C. Labor unions are prohibited
D. Businesses are driven by the desire for
profits
Command Economy
• Government planners answer ALL
economic questions. Government
planners determine what will be made,
how much workers are paid, and how
much things will cost.
Command Economy
4. Where are these economies located?
• China, Cuba, North Korea
Example of a command economy:
Communism - the government owns or
controls almost all the means of
production
Which group has the greatest influence in
determining what goods and services will be
produced in a communist economic system?
A. Farmers
B. Government officials
C. Consumers
D. Business leaders
Important Note:
• No country has a pure market or command
economy, but instead lies somewhere on
the spectrum between the two. Around the
middle, you have Socialism
Socialism
• Falls between Communism and Capitalism
in terms of government control.
• Some industries may be government
owned, other businesses are privately
owned.
Socialism
• Taxes are generally very steep
• Many social services are provided free:
education, health-care, child-care, etc.
• Both France and Sweden are examples of
Socialist economies.
In a socialist economic system, the government—
A. Has little say in what goods are made
B. Does not influence the distribution of
goods and services
C. Guarantees all consumers a high income
D. Often owns major businesses
• Lesser developed countries tend to
practice an entirely different economic
system…
Traditional Economy (subsistence)
1. What and how many goods/services
will be produced?
•
The goods produced are the essentials
to survive: food, clothes, etc. People
usually only provide enough for
themselves and their family.
Traditional Economy (subsistence)
2. How will these products be produced?
Families produce what they can based on
the resources available to them.
Generally, people do what their ancestors
did. These customs have been carried
down from one generation to the next.
Traditional Economy (subsistence)
2. How will these products be produced?
-Subsistence Agriculture
-Cottage Industries: Goods are made by
hand in homes or small workshops for
family or local use.
Traditional Economy (subsistence)
3. How will the products be distributed?
•
Goods are distributed among the family.
There is little surplus or exchange of
goods. As a result, there are few
markets (places to buy and sell things).
Traditional Economy (subsistence)
4. Where are these economies located?
• Poor countries (developing countries) and
rural areas
– Examples: Many countries in Africa, Central
and South America
Which statement describes an aspect of a
traditional economy?
A. Profit motivates individuals to set up
private businesses
B. The interplay of supply and demand
regulates prices
C. Tradition and customs greatly influence
economic decisions
D. Government directs and controls the
means of production
In Indonesia, the government owns large industries
and sets some prices. However, private
businesses are also encouraged and several
hundred are actively traded on the Indonesian
Stock Exchange. This country’s economy system
can best be classified as—
A. Traditional
B. Free enterprise
C. Socialist
D. communist
Which is a major feature of an economy based on
subsistence farming?
A. Most adults work outside the home
B. Farmers compete with each other
C. Farmers raise just enough crops for their
family to survive
D. The government decides which crops will
be grown
Which heading best completes the partial outline
below?
I. _____________________
A. Interaction of Supply and Demand
B. Profit Incentive
C. Entrepreneurs
A. Types of Economic Systems
B. Characteristics of a Free Enterprise
Economy
C. Structure of a Socialist Economic System
D. Cottage Industries
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Traditional Economy