MIXED ECONOMIC SYSTEMS
An economic system is the way society organizes the production and consumption of goods and
services. Every economic system answers three basic economic questions: What to produce? How to produce?
and For whom to produce? How a society answers the three basic economic questions determines the society’s
economic system.
Historically, there are three types of economic systems—traditional, command, and market systems.
These economic systems answer the basic economic questions in different ways. In an economic system based
on tradition, decisions are based on past behavior. In a command economy, decisions about production and
consumption are made by a central planning unit, such as the government. A market system answers the basic
economic questions in the marketplace. A market economy is an economic system where most goods and
services and resources are exchanged through transactions by people and businesses.
Most economies contain some features from a market and command economic systems; this is called a
MIXED ECONOMY. Mixed economic systems are best because a mixture best satisfies the economic goals of a
society - such as economic freedom, equity, and economic security.
0%
Pure
Command
Place the following countries on the continuum.
United States 76.5%
Israel 70.5%
Saudi Arabia 62.1%
Iran 41.8%
Turkey 63.2%
100%
Pure
Market
MIXED ECONOMIC SYSTEMS
An economic system is the way society organizes the production and consumption of goods and
services. Every economic system answers three basic economic questions: What to produce? How to produce?
and For whom to produce? How a society answers the three basic economic questions determines the society’s
economic system.
Historically, there are three types of economic systems—traditional, command, and market systems.
These economic systems answer the basic economic questions in different ways. In an economic system based
on tradition, decisions are based on past behavior. In a command economy, decisions about production and
consumption are made by a central planning unit, such as the government. A market system answers the basic
economic questions in the marketplace. A market economy is an economic system where most goods and
services and resources are exchanged through transactions by people and businesses.
Most economies contain some features from a market and command economic systems; this is called a
MIXED ECONOMY. Mixed economic systems are best because a mixture best satisfies the economic goals of a
society - such as economic freedom, equity, and economic security.
1% to 49% “more command than market”
0% pure command
100% pure market
51% to 99% “more market than command”
“More Command than Market”
What to produce?
“More Market than Command”
What to produce?
Government decides what to produce, BUT
private/individual ownership of small business is
allowed in limited amounts
How to produce?
Business owners / leaders decide what to produce
based on sales, BUT the government controls some
of the decision making
How to produce?
Government controls most of the means of
production (factories and tools), BUT small business
owners /leaders make limited decisions on how to
produce items
Business owners / leaders decide how to produce,
BUT the government sets minimum safety
requirements, minimum wage, and age to start work
(child labor laws). Government also sets guidelines
for product safety
For whom to produce?
For whom to produce?
Government determines who receives which goods
and services BUT a few items available outside the
governments control (black market)
EXAMPLES
North Korea, Iran
Consumer’s incomes determine who gets which
goods and services (whoever can buy it) BUT
government provides welfare benefits for the needy
EXAMPLES
Israel, Saudi Arabia, Nigeria, South Africa, China,
Japan, India