Bellringer
 Who decides how many shirts you buy when you go
to the store?
 Who decides what you eat? Or What profession you
will have?
Economic Systems
SSEF4B EVALUATE HOW WELL EACH TYPE OF SYSTEM
ANSWERS THE THREE ECONOMIC QUESTIONS AND
MEETS THE BROAD SOCIAL AND ECONOMIC GOALS OF
FREEDOM, SECURITY, GROWTH, EFFICIENCY, AND
STABILITY.
SSEF4 THE STUDENT WILL COMPARE AND CONTRAST
DIFFERENT ECONOMIC SYSTEMS AND EXPLAIN HOW
THEY ANSWER THE THREE BASIC ECONOMIC OF WHAT
TO PRODUCE, HOW TO PRODUCE, AND FOR WHOM TO
PRODUCE.
Economic System
 An Economic system is the method used by a society
to produce and distribute goods and services.
Three Economic Questions
 Because economic resources are limited, every
society must answer three key economic questions:



What goods and services should be produced?
How should these goods and services be produced?
Who consumes these goods and services?
What goods and services should be produced?
 Each society must decide what to produce in order to
satisfy its needs and wants.
 Recall guns and butter trade-off
How should goods and services be produced?
 For example, should we produce electricity with oil,
solar power or nuclear power?
 Regardless of the decision of how all require land,
labor, capital. The factors of production can be
combined in different ways.
Who consumes goods and services?
 How do good get divided up?
 The answer to question of distribution is determined
by how societies choose to distribute income.
 Factor Payments the income people receive
for supplying factors of production, such as
land, labor, or capital.
Economic Goals and Values
Economic Goals
Economic Efficiency
Making the most out of resources
Economic Freedom
Freedom from government intervention
in the production and distribution of
goods and services
Economic Security and predictability
Assurance that goods and services will
be available, payments will be made on
time, and a safety net will protect
individuals in times of economic
disaster
Economic Equity
Fair distribution of wealth
`Economic Growth and innovation
Innovation leads to economic growth,
and economic growth leads to higher
standard of living.
Other Goals
Societies pursue additional goals, such
as environmental protctions.
Market Economy
 Economic system in which decisions on production
and consumption of goods and services are based on
voluntary exchange in markets.
 Individuals the people in society answer the three
economic questions.
 Also called free market or capatalism
Command Economy or Centrally Planned
Economy
 Economic system in which the central government
makes all decisions on the production and
consumption of goods and services.
Mixed Economies
 Market based economic system with limited
government involvement.
Traditional economy
 Economic system that relies on habit, custom, or
ritual to decide questions or production and
consumption of goods and services.
Assignment
What?
How?
For
Whom?
Traditional
Command
Market
 Create a chart that has three rows (one for each of the three basic
economic questions) and three columns (one for each of the type of
economic systems). In each cell, explain that a producer will take into
account when answering the given economic question for the given
economic system.