McFarland

• Every country in the world must make economic choices in order to use their natural, human, and entrepreneurial resources efficiently.

• The leaders of each country must address the 3 basic economic questions – what, how, and for whom?

• Traditional
• Command
• Market
• Mixed

• Traditional
– Determined by tradition
– Economic roles passed from generation to generation
• Command
– Determined by government officials
• Market
– Determined by individuals

• Traditional
– Determined by custom
• Command
– Determined by government officials
• Market
– Determined by individuals

• Traditional
– Usually centered around traditional family and social units such as tribes
• Command
– Determined by government officials
• Market
– Determined by individuals

• Traditional
– Aborigines of Australia
– Inuit of Canada
• Command
– Middle Ages in Europe
• Market
– U.S.
– Canada

• A mixed economy combines elements of all the other 3 economic systems

3 Main Categories of Mixed
Economies
• Communism – the government owns or controls nearly all the factors of production – leans towards the command model – ex. Cuba
• Capitalism – the individuals own the factors of production – leans toward the market model – ex.
U.S.
• Socialism – the government owns some of the factors of production – ex. France

• Individuals in the U.S. are free to exchange their goods and services, seek jobs of their own choosing, use their resources as they wish, and own and operate businesses.

• Because of these freedoms, the capitalist economy of the U.S. is sometimes called a free enterprise system, a system under which business can be conducted freely with little government intervention.

• Free-enterprise is based on 5 main features
• In the U.S. individuals have the right to…

5 Main Features of Free-Enterprise
• Own private property and enter into contracts
• Make individual choices
• Engage in economic competition
• Make decisions based on self interest
• Participate in the economy with limited government involvement and regulation

• Goods that are owned by individuals and by businesses, rather than by the government are considered private property
• Ex. Clothes, CD’s, books, factories, machinery, etc.

• Individuals have the right to enter into agreements with one another to buy and sell goods and services
• These agreements are called contracts – ex.
If John agreed to sell a CD to Jamie, they have a contract
• Contracts can be oral or written

• Property owns, laborers, producers, and consumers in the U.S. enjoy freedom of choice
• Ex. Producers are free to make whatever they wish

• Sometimes 2 or more people decide to make the same product or provide the same service
• This leads to competition, or the economic rivalry that exists among businesses selling the same or similar products
• The more competition there is, the lower the price of the product

• Free-enterprise allows producers and consumers to make economic choices for their own benefit.

• Freedom
• Efficiency
• Equity
• Security
• Stability
• Growth