Introduction to Business
Chapter 1.3 Economic Systems
Types of Economic Systems
1. _______________
2. _______________
3. _______________
There are no countries with these actual systems; all have a __________of some kind
Traditional Economy
 Families or tribes make economic decisions based on __________ and
____________.
 Based on ____________and customs handed down through the generations
 One goal is simply to ___________ and everyone has a role in meeting this goal
 The good of the group always is put ___________ individual preference
 Sometimes found within another economy as a ___________ society (Amish, tribes
in South America and Africa, etc.)
Command Economy
 The ___________decides what goods and services to produce, how this will be done
and who will get them
 Government makes these decisions based on their _____________ rather than
citizen preference
 Government often owns means of production – ___________________ and
factories
 North Korea and ________ are closest to this type of economy
Market Economy
 _______________ makes the economic decisions
 Consumers spend ________ the way they wish, enter into business, _____ their
labor
 Producers _________ what to produce and how to use their resources to make the
most money possible
 Individual act in their own ______________ which, in theory, benefits others
(Adam Smith’s theory)
Characteristics of a Traditional Economy
Advantages: It clearly _________ the three economic questions; Produces what is best
to ensure the _____________of the society with little disagreement over goals and roles
Disadvantages: Resistant to _________, less _____________ than other economies,
often no personal preference about role they play or use of _______________ of the
individual, no development of _______so standard of living is lower
Characteristics of a Command Economy
__________ planned economy – leaders decide specifics such as wages, who gets those
wages and how they are spent (What businesses can operate in your town; What these
businesses would ________ and how much; _______would work in these businesses and
how much each of them would ______)
Problems:
 _______________ preferences are not often taken into consideration
 Development is often limited to ___________ areas (former Soviet Union – space
travel; North Korea – weapons and arts)
 Lack of ______________ (may even be restricted)
Problems with Command
 ______________ preferences are not often taken into consideration
 Development is often limited to __________ areas
 former Soviet Union – _______travel
 North Korea – __________ and arts
 Lack of ______________ (may even be restricted)
Characteristics of PURE Market
 No _____________ regulation or involvement
 Based only on _______/demand
 Right to own property and make a_________
 Right to __________ wealth
Disadvantages of PURE Market
 No Government controls
 _________ and corruption are not limited
 ______________concerns are not addressed
 Working conditions and __________ pay are not priority
 No way to provide public _________to those who cannot get them on their own
 Tends to be a _____ in standard of living – “class” system can develop
Go to textbook pages 20-22 and define the following
Characteristics of a Mixed Economy
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Benefits of a Mixed Economy (Go to Internet and research)
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Disadvantages of a Mixed Economy (Go to Internet and research)
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The US Economic System
Characteristics of Capitalism
 ___________________________________________________________________
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Advantages of Capitalism (Research on Internet)
 ___________________________________________________________________
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Disadvantages of Capitalism (Research on Internet)
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