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.