Chapter 2 Economics An economic system is the term used to describe how a nation is organized for production There are three types of economic systems People make goods for themselves and their families Their economic roles are the same as that of their parents and grandparents Societies that produce goods in traditional ways still exist today in parts of South America and Asia A system where people choose what to buy and sell and competition determines the price This is also known as capitalism or the free enterprise system The U.S. strives to have a free enterprise system The government decides what to produce This system exists in Cuba today Every type of economic system must answer certain questions What to produce? How to produce it? Who will receive it? Who owns the means of production in the economic system? But, each system answers these questions differently Nowhere today has an economic system that is truly 100% market or command Most have elements of each type For instance the U.S. is mostly a market economy, but does have some government owned businesses and regulations which are elements of a command economy List and describe the three types of economic systems. Secondly describe the four questions each economic system must answer. Finally, explain why the United States is not considered a true market economy.