Unit 2
ECONOMIC SYSTEMS
Warm Up
1. What does equality mean to you?
2. How do you define equality?
3. Should we be equal in every aspect of our
lives?
TYPES OF ECONOMIC SYSTEMS
Traditional Economies – the allocation of
scarce resources, and nearly all other economic
activity, stems from ritual, habit or custom.
Command Economies – are economies in
 which a central authority makes most of
WHAT, HOW, and FOR WHOM decisions.
Economic decisions are made by the
government.
Market Economies – People and firms act

in their own best interests to answer the
WHAT, HOW, and FOR WHOM questions.

MIXED ECONOMIES
OR
MODIFIED FREE ENTERPRISE ECONOMY
Most economies in the world today feature
mix of traditional, command,
and market
economies.
 The United States has a
combination of command
(planned) and market
economies.
 We have a market (free
enterprise) economy with
some government
intervention.

some
PLACE THE U.S. ECONOMY?
OF MIXED ECONOMIES
Planned
Free
North Korea
Makes most, if not all
Economic Decisions
The Role of Government
Owns most key resources
United States
Canada
Great Britain
Germany
China
France
India
Russia
Socialism
Hong Kong
SPECTRUM
Promotes competition
and
Supplies' Public Goods
SECTION 2
EVALUATING ECONOMI
PERFORMANCE
1)
Economic Freedom
C
–
freedom to make your own economic
decisions
2)
Economic Efficiency –
benefits gained must be greater
costs incurred
3)
Economic Equity – a
strong sense of justice,
impartiality, and fairness
R
than
EVALUATING ECONOMIC
PERFORMANCE CONTINUED
4)
Economic Security –
5)
Full Employment –
protection
adverse economic events as layoffs and
illnesses
from
to produce as many
jobs as possible
6)
Price Stability –
steady prices, void
inflation
7)
Economic Growth –
of population growth
R
to meet the needs
of
SECTION 3
FREE ENTERPRISE
 In
CAPITALISM
a Capitalistic Economic
System individuals own most of
the factors of production. This
economic system exists due to
free enterprise. In a free
enterprise economy, competition
is allowed to flourish with a
minimum of governmental
interference.
R
MAJOR FEATURES
1.
2.
3.
4.
5.
OF
CAPITALISM
Economic Freedom
Voluntary Exchange
Private Property Rights
Profit Motive
Competition
COMPETITION & FREE ENTERPRISE
 Economic
Freedom allows
individuals and businesses to
choose their economic
destiny.
A
Voluntary Exchange
happens when both parties
benefit from the transaction.
R
COMPETITION & FREE ENTERPRISE CONTINUED
 The
privilege that entitles people
to own and control their
possessions as they wish is known
as Private Property
Rights.
COMPETITION & FREE ENTERPRISE
 Profit
is the extent to which
persons or organizations are better
off at the end of a period than
they were at the beginnin
g.
 Profit
motive is the driving
force that encourages people and
organizations to improve their
material well being.
CONTINUED
COMPETITION & FREE ENTERPRISE CONTINUED
 The
result of Competition is that
goods and services are produced at
the lowest possible cost and
allocated to those who are
willing
and able to pay for them.
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THE ROLE OF THE ENTREPRENEUR

The entrepreneur is one of the most important people
in a free enterprise (capitalistic) economy. The
entrepreneur organizes and manages land, labor, and
capital in order to seek the reward
called profit. In other words – Entrepreneurs
make things happen.
THE ROLE OF THE CONSUMER
Consumers play an important role in the
American Free Enterprise
economy.
 They control what is produced when they express
their wants through purchasing goods and
services.

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THE ROLE
OF
GOVERNMENT (CONTINUED)
Consumer –
Federal, State and Local
governments provide goods
and services for citizens.
In
the process of providing,
government consumes
factors of production.
 Provider &
THE ROLE OF GOVERNMENT
 Protector –
The
government protects
property rights and
enforces contracts to
ensure an efficient
and fair economy.
THE ROLE
OF
GOVERNMENT (CONTINUED)
 Regulator –
is
The national government
charged with preserving competition. Local
and state governmentscontrol
businesses with zoning regulations,
taxes, insurance rates,
etc.
Promoter of National Goals
The government should reflect
the will of the majority of its
people.