1 Types of Economic Systems

CP Economics (Chapter 2, #1) GPS SSEF4a
Name ______________________________
Date ___________________ Period______
Types of Economic Systems
Warm Up #6
1. Which factors influence economic decisions made in our school?
2. Who makes these decisions? ___________________________________________________________
3. What are these decisions based on?_____________________________________________________
I. Types of Economic Systems
1. An ______________________________________________ is the way in which a society uses its resources to satisfy its
people’s unlimited wants.
1. An economic system determines ______________________________________, how to produce, and for whom to produce.
Countries have mixed systems, but some systems give more economic and political ____________________ and create more
_____________________ than others.
C How do nations answer the 3 basic questions?
1. ________________________________________?
2. How to produce it?
3. For whom to produce?
II. Based on the type of Economic System
A. Traditional
B. Command
C. Market
III. Traditional Economy
A. Based on a society’s __________________, customs and traditions.
B. Answered by the past _______________________, habits, laws and religious beliefs.
IV. Characteristics of Traditional Economies
1. Early societies all had ________________________________ economies
2. Traditional systems help societies survive
3. Tend to be ________________________________; do not adapt to change
Think-Pair Share discussion question? 1 min
How would your life be different if you had grown up in a traditional economy?
V. Command Economy
A. Relies on _______________________________ officials to answer the 3 basic questions. The government maintains complete
control over the _____________________________________________________.
B. Also called ______________________________________________.
VI. Fundamentals of Command Economy
1. _________________________ planned economy-central government makes all ____________________.
2. Decides for whom to produce in part by setting __________________________.
3. Only some people have money to buy available products.
4. ____________________________________________
i. Seeks to provide for everyone even the ____________________ and __________ who are no longer productive
ii. Direction changes _____________________________ in a relatively short time.
5. ____________________________________________
i. Central planners set prices below the market which causes __________________________
ii. No incentive to __________________________, because they receive similar wages regardless of skill.
VII. Fundamentals of a Market Economy
1. Individuals answer the 3 basic economic questions.
2. __________________________________________- right to own businesses and resources
3. Property means material objects, money, intellectual property, _________________
4. ______________________________- place or situation where people buy and sell goods, services
B. Private Property and Contracts
1. Owned by individuals, ______________________________, instead of the government
2. _____________________________________ agreements to buy and sell goods and services, oral or
written, it is legally binding.
C. Limited Government Involvement
1. Government establishes health and safety laws, ___________________________ banking practices, and
_____________________________ discrimination in the workplace.
2. __________________________________________-is the principle that the government should not interfere in the marketplace
D. Competition
1. Is the economic _________________________________ that exists among businesses selling the same or similar products.
2. ____________________________________________________
a. Consumers are free to purchase what they want and refuse products they do not want
E. Voluntary Exchange in Markets
1. Market economies allow _________________________ and _________________________ to make choices for their own
2. ___________________________________________
a. When producers and consumers benefit in a trade transaction.
b. _____________________________________________
i. The ______________________________ for financial gain that a seller makes from a business transaction.
F. When there is Voluntary Exchange businesses can _______________________________________.
1. _____________________________________
a. Is a situation in which people _______________________________________ their efforts in the
___________________________ that they do best.
b. encourages efficient use of resources
c. leads to _________________________________, lower-priced products
Think-Pair Share discussion question? 1 min
List below at least 2 disadvantages of a market economy?
1. ___________________________________________2. ________________________________________
VIII. Today _________ economies are really mixed!
1. ________________________________________ has elements of traditional, command, and market systems
2. ____________________________________________________________________________________
3. Traditional, command, market economies adopt elements from others
Closure Activity #4
Explain in detail, which of the following economic systems do you prefer?