Types of Economies- Traditional
• Developed from long
established patterns of
behavior & belief
• Tribal economies are
traditional
Types of Economies- Command
• Govt. decision making &
control of resources
• Egyptian economies with
the Pharaoh
• Lords in the Middle Ages
controlling land & all
resources
• USSR
Types of Economies-Market
• Individuals allowed to
control & allocate resources
• Self interest controls the
market economy (Adam
Smith’s ideas)
Most Economies-Mixed
• China article description of their economy
• Market Leninism, socialist market
economy, authoritarian capitalism, dot
communism, or Confucian capitalism
Mixed Economies
Authoritarian Socialism-Communism
• Closest to pure Command
– Authoritarian Socialism or Communism
– Fidel Castro, Former Soviet Union, & North
Korea
Mixed Economies-Capitalism
• Closest to pure Market is Capitalism
• Individuals own the factories and industry
• Some government regulation & taxes for
services, but primarily private business
operates freely
Mixed Economies-Capitalism
• United States, Japan, South Korea
Mixed Economies
Democratic Socialism
• Democratic Socialism
• Nations with systems between
authoritarian socialism & capitalism
• Government owns key industry like
electric utilities, telephone
Mixed Economies
Democratic Socialism
• Examples are Sweden, France,
Poland
• Sweden’s population pays about 50%
tax
United States Economic System
• Follows the Market Model
– Not a pure market economy
– Has Some Government Involvement &
Regulation
– Worries now about how much governement
United States Economic System
• U.S. economy based on freedom to make
choices
– Called a Free-enterprise system
Circular Flow Model-The Circular
Flow
Product Market
Resource Market
Six Main Goals of US Economy
• 1. Economic Freedom
• Heart of Freeenterprise
– Consumers free to
spend their incomes the
way they want to
– Workers are free to
chose their occupations
– Business people free to
own their business
Six Main Goals of US Economy
• 2. Economic Efficiencymake the best of scarce
resources
• How many goods &
services can our workers
produce
• The more products each
worker produces the more
efficient we become
Six Main Goals of U S Economy
• 3. Economic Equity-i.e.., .....
taxes (who pays, how much,
what is fair)
• Our tax system has to answer
the questions of what is fair
– Who pays? How much?
• Environmental policies
– What is fair in the deforestation
policy
Six Main Goals of US Economy
• 4. Economic Security-keep individuals &
organizations secure
• Protect society members from poverty
• Stop bank failures—protect our money
• Social security questions
Six Main Goals of US Economy
• 5. Economic Stability-full employment &
stable prices
• Keep employment at a 95% level
• Keep all prices stable
– Runaway inflation
– WWI German Mark
Six Main Goals of US Economy
• 6. Economic Growth-increase goods &
services & provide good standard of living
• Standard of living
– Measured by how much the average person
in a country is able to consume in given
period of time—usually one year
Bill Gates House
Average residence West Bengal, India
Standard of Living
• Standard of living improves when
production from each worker increases
faster than total population
Terms in Chapter 2 Section 2
• Private Property: What Are Property Rights YouTube
• Contracts
• Competition
• Self-interested decisions
• Producers
• Consumers
• Limited Government