Types of Economies

Types of Economies
Basic Decisions To Be Made
How much freedom should
the citizens have to make
decisions on their own?
 Citizens and leaders have to
decide what goods will be
produced or services will be
Difficult question of how the
goods are to distributed
Economic System:
organized set of procedures
and practices that a society
follows in the production and
distribution of goods and
4 Types of Economic Systems
Traditional Economy: relies
on customs
Customs, religion, and laws aid
in the passing of skills from
parent to child
Change happens slowly because
people are reluctant to move
from how things were done in
the past
Some of these systems still
exist in Africa, Latin America,
and the Middle East
Command Economies: rely
on powerful government
officials, often named central
planners, to make economic
Decide on how goods will be
produced and how much of
each will end up in the hands
of the citizens
 Individual citizen usually has
to defer to the leaders on
most economic matters
Ancient Egypt, the pharaoh
controlled all aspects of
production and distribution
 Owned all of the land and
collected all of the taxes
 European Middle Ages- lords
of the manor exercised
similar power
Pure Market Economy:
relies on the individual to
make the economic decisions
 Government has little say in
what is produced, sold, or
 System relies on the
“market” to provide enough
resources to keep things
A market is where goods and
services are exchanged
 People are motivated by selfinterest
Mixed Economies:
economies of today are
classified this way, because
they combine aspects of the
pure market and command
Capitalist: United States
 Individuals own and control
the resources, but the
government does have some
control of the economy
through taxation and
Nations that are closer to the
command style economy are
known as authoritarian
socialist or communist
 Government controls all of
the resources and makes all
economic decisions
Cuba is an example of a
communist countryindividuals are starting to
make more economic
decisions for themselves
Evaluate the economic
system of the United States.
List and explain a few of its
strengths and weaknesses.
 Diversity of people
 Large amounts of capital
 Freedom of movement and
 Trade deficit
 Lack of savings
 Distribution of wealth
Who Gets What and Why?
United States has less than
5% of the world’s population
 We consume over 1/3 of the
world’s food.
 How is that possible?
 Is there a lot of waste
How did we gain such
 How do we maintain such
Microeconomics: decisions
made by individuals and
 Macroeconomics:
economics on a national or
global scale- you would study
this if you wanted to know
how our national govt uses
its resources
Learning how to make a
small business run more
efficiently would be by
studying microeconomics
 If you are going to major in
business, you will have to
take both macro and micro
How can the United States
control so much of the
world’s resources? Why do
we have it so good?
We have a good standard of
living because we produce so
much surplus wealth
 We are the world’s primary
economic power because for
the last two centuries, we
have had a legacy of
economic freedom that
allowed capital to be used by
entrepreneurs in order to
innovate and excel
Quiz Friday over the last two
 Current event due Friday
 Extra credit for a current
event that is about any of the
material from this week of