Mr. Kraus
Economics
Economic Systems
Why do we have Economic
Systems?
• Scarcity
• Survival for any society depends on its
ability to provide food, clothing, and
shelter for its people.
• The Economic System is the organized
way a society provides for the wants
and needs of its people.
Three Economic
Systems
• Traditional Economy
• Command Economy
• Market Economy
Economic
Questions
What to
Produce
How to
produce
For whom
to produce
Traditional
Economy
Market
Economy
Command
Economy
Traditional Economy
• Economic
activity is
based on
ritual, habit
and custom
Strengths of Traditional
Economies
• Everyone knows their role
• Little uncertainty over what to
produce or how to produce
• The question of For Whom to produce
is answered by custom
• Life is generally stable, predictable,
and continuous
Weaknesses of
Traditional Economies
• Tends to discourage
new ideas
• Lack of progress
leads to lower
standard of living
Market Economy
• Markets allow buyers
and sellers to come
together in order to
exchange goods and
services
Market Economy
• People and firms
act in their own
best interest to
answer economic
questions
Strengths
• Markets can adjust over time
• Freedom exists for everyone involved
• Relatively small degree of governmental
influence
• Decision making is decentralized
• Variety of goods and services are produced
• High degree of consumer satisfaction
Weaknesses
• The primary weakness is deciding for whom
to produce
• The young, sick and old would have difficulty
in a pure market environment
• Markets sometimes fail
Command
Economy
• Central authority makes most economic
decisions
• Economic decisions are made at the top and the
people are expected to go along with choices
their leaders make
Strengths of
Command Economies
• Change direction
drastically in a
relatively short
time
Weaknesses of
Command Economy
• Not designed to meet the wants and needs of
individuals
• Lack of incentives to work hard leads to
unexpected results
• Large bureaucracy for economic planning
• Not flexible in dealing with minor day to day
problems
• People with new or unique ideas are stifled
BRAINSTORM
Which of theses systems best describe the
economy of the United States?
Mixed Economy
-No Economic System is purely Command or purely
Market .
-ALL economic systems use some combination of
command and market features. LIKE A
CONTINUUM
Example: North Korea
• Look for a few key
elements
–
–
–
–
Government
Values
Standard of living
Answer the 3 economic
questions
In pods
• Answer the 3 economic questions
• Decide which type of economic system best
describes North Korea’s economy
• Discuss: Based on this video, how can you
tell the type of economy North Korea has?
Example: India
• Look for a few key
elements
–
–
–
–
Government
Values
Standard of living
Answer the 3
economic questions
https://www.youtube.com/watch?v=PZpDjxIPpFc&feature=player_detail
page
In Pods
• Answer the 3 economic questions
• Decide which type of economic system best
describes India’s economy
• Discuss: Based on this video, how can you
tell what type of economic system India
has?
Now find your own!
• Choose 2 countries.
• Research those countries (as well as India and the U.S.)
Things to think about:
Government
Standard of Living
Values
3 Economic Questions
Choose one of the countries you researchedIn 1
paragraph, tell me what country you have chosen, what
are some of the values your country has, and what type of
economic system has. Make a connection between the
country’s values and the economic system.