Chapter 2
Economic Systems
Pages 37-65
Classroom Economics
• The classroom will become an
economy that produces threecolor paper chains made with
four-inch strips and paper
airplanes with drawn-on
windows and a logo on the
wings.
• You will be divided into five
groups.
Command Economy
• Groups must get supplies from
the teacher.
• Group 1 measures and marks
the paper for cutting.
• Group 2 cuts each strip.
• Group 3 attaches strips to
make three-color chains.
• Group 4 folds the paper
airplanes.
• Group 5 draws the logos and
windows.
Free Market Economy
• Supplies are available from
the teacher, but groups can
use their own supplies. Each
group decides whether to
make chains or airplanes or
both. Groups may trade
amongst themselves. The
group with the most pairs of
chains and airplanes wins.
Reflection
• Compare the total number of
chains and airplanes produced
under each system. Who
owned the factors of
production and who made the
decisions about what to
produce and how to produce
it.
Section 1 Objectives
• Identify the three main types of
economic systems
• Understand how a traditional
economy operates, including
its advantages and
disadvantages
• Analyze how modern forces
are changing traditional
economies.
Types of Economic Systems
• How important is it to feel that
you have choices in your
lives?
• Give some examples of the
choices that you have
available
• Consider instances in which
your choice was denied and
the reasons for the denial.
Key Concepts
• Utopia means “no place” in
Greek, a book written by
Thomas More. In the book
wants are limited and easily
fulfilled.
• Again the three questions
need to be answered:
– What should be produced?
– How should it be produced?
– For whom will it be produced?
Economic Systems
• Economic System: society
uses its scarce resources to
satisfy its people unlimited
wants.
• “Mixed” economies: which
have features of more than
one type of economies.
Traditional Economy
• Traditional Economy: A
system which families,clans,
or tribes make economic
decisions based on customs
and beliefs that have been
handed down from generation
to generation.
• Example: Men hunter
gatherers, women tended to
children and the crops,
youngest helped with chores
and learned skills needed for
the future.
Command Economy
• Command Economy:
government decides on what
goods and services will be
produced, how they will be
produced, and how they will
be distributed.
• Example: Wants of individual
consumers are hardly ever
considered.Government
usually owns the means of
production, all resources and
factories. North Korea and
Cuba
Market Economy
• Market Economy: based on
individual choice, not
government directives. In this
system consumers and
producers drive the economy.
• Consumers: can spend
money as they wish, enter into
business, or sell their labor.
• Producers: decided what
goods or services they will
offer. Make choices how to
use their limited resources to
make a profit.
Discussion-Questions
• Traditional- What-what has always
been produced; How-in traditional
ways; for whom-good of the group
• Command-What-the government
decides; how-by governmentowned means of production; for
whom-the whole group
• Market-What-the goods consumers
will buy are produced; how-by
individually-owned enterprises; for
whom-people who can afford them
Activity
Understand Types of
Economies
1.
2.
3.
You will be divided into small groups.
In your group create a poster that shows
the three economic questions (What
should be produced?-How should it be
produced?-For whom will it be
produced?) and how a traditional,
command, and market economy answers
each of those questions.
Arrange the poster in any way but make
sure that it contains at least one
illustration for each question.
Characteristics of Traditional Economies
Advantages
• 1. Answers the three
economic questions.
• 2. Produces what is best
to ensure survival.
• 3. Distribution determined
by custom and tradition
• 4. Very little
disagreement over
economic goals and roles
Disadvantages
• 1. based on ritual and custom.
• 2. resist change
• 3. inefficient and does not
adapt to change
• 4. prevent people from doing
the jobs they want to do or
best suited
• 5. Don’t acquire material
wealth
• 6. much lower standard of
living
Under Pressure to Change
• Kavango: Tribe of Namibia in
southern Africa.
• Traditional economies have been
under pressure to change. Practice
Subsistence farming: grow
enough to feed their own families.
Now with modern media they are
constantly exposed to outside
influences. Many are leaving to go
to larger areas.
• Some have switched to commercial
farming, but many still practice
traditional farming.