Unit 6.5
Compare characteristics of
command, market, traditional,
and mixed economies.
Essential Questions:
How does a market economy
protect consumers?
What are the advantages and
disadvantages to consumers when
the government intervenes in the
economy?
Why might a nation choose one
economic system over another?
Economic Systems
Market economy
Mixed Market economy
Mixed economy
Command economy
Traditional economy
Market Economy
An economic system in which businesses
and consumers, not the government, decide
what is produced.
It is also known as Free Enterprise or
Capitalism.
The economy is influenced by Competition,
Supply, and Demand.
No pure market economy exists, thus most
economies in the world are Mixed.
Most market economies exist in the western
countries.
Free Enterprise or Capitalism
Capitalism generally refers to an economic
system in which the means of production are
all or mostly privately owned.
Profit is the main motive.
In a capitalist economy, “Greed is Good”
because a person’s want to make profit will
drive the economy.
If a producer of a product creates and sells
something the public does not want, the
consumer will simply not buy it.
The producer will go out of business.
Adam Smith – “Father of
Capitalism”
Mixed Market Economy
There is no pure market economy.
Government assistance and planning is
needed.
The USA is officially a mixed market
economy because people are free to
consume and produce what they wish,
but the government does control
certain parts of the economy.
Taxes, Social Security, Welfare.
Mixed Economy
A mixed economy is an economic
system that incorporates the
characteristics of several different
economic systems.
Usually combines a mixture of market
(free) and command (government)
economies.
The individual will have the economic
freedom of choice intertwined with
government planning (like Social Security
or free healthcare).
Does this sound like the USA?
Command Economy
An economic system in which the
Government controls everything in the
economy.
It is also known as a planned
economy because the government
plans every aspect in the economy.
There is no private property or
ownership. It is all shared by
everyone.
Karl Marx – “Father of
Communism”
Traditional Economy
A traditional economy is an economic
system in which resources are allocated by
inheritance, and which has a strong social
network and is based on primitive methods
and tools.
It is based on tradition, custom, and the way
things have always been done.
They have not changed very much over time.
They are often called “Third World Countries”
Found in agricultural parts of Asia, Africa, and
South America.
Basic Economic
Questions
What to Produce?
How to Produce It?
For Whom To Produce It?
What to Produce?
Society must decide what to
produce with its limited resources.
For example, society may have to
choose whether to produce goods
for defense or services for poor
people.
How to Produce?
Society must decide how to
produce something.
For example, should we accept
more pollution from factories in
exchange for greater output of
products?
For Whom to Produce?
Society must decide for whom to
produce a product.
Who will receive the goods and
services?
In the United States, most goods
and services are distributed
through the price system.
How Much to Produce?
Society must ask the question
how much to produce because of
scarcity.
With limited resources, you must
decide how much of something to
produce.