Economic Systems
Chapter 26 Section 2-3
Economic System
Is the way a nation decides how to use its
resources to satisfy its people’s needs
and wants.
4 Basic Economic Questions
1) How Should Goods and Services Be
Produced?
For each good and service produced, there
is always a trade-off possible among the
available factors of production.
Should labor or capital be the
main resource used?
4 Basic Economic Questions
2) What and how much should be
Produced?
Because of scarcity, what is produced limits
what could have been produced.
Is maintaining a golf course a good
choice for a community scarce of
water?
4 Basic Economic Questions
3) Who Should Produce What?
Within each economic system, different
people do different jobs. Who decides
which people will produce which goods and
services?
Should you choose your career or should the
government? Should your gender choose your
career?
4 Basic Questions
4) Who Should Share in What is
Produced?
Money payment for work, the amount of
health care, education, food, and so on is all
part of the distribution of income.
Who gets to experience the “American
Dream”?
Types of Economic
Systems
1. Traditional System
2. Command System
3. Market System
Traditional System
 How are the economic questions
answered?

We do things the way they have always been done.
Buzzers get ready Traditional
System
Cambodia
Buzzers get ready Traditional
Systems
Sierra Leone
Traditional System answers to
the 4 economic questions
1. How Should Goods and Services be
produced?
 The way they have always been done.
Craftsmanship is valued and taught.
2. What and how much should be produced?

Enough to meet the local market demand.
Traditional System answers to
the 4 economic questions
3. Who Should produce what?
 If your father was a blacksmith that is what you
are trained to do.
 Females raise the family.
4. Who Should share in what is produced?
 Wealth and gender determine access to goods
and services.
Command System
 How are the economic questions
answered?
 Completely by the Government
 The individual has little, if any, influence over
how the basic economic questions are
answered.
Buzzers get ready Command
Systems
Cuba
Buzzers get ready Command
Systems
North
Korea
Command System answers to the
4 economic questions
1. How Should Goods and Services be
produced?
 Government planners make all the decisions.
2. What and how much should be produced?

Government owns all the Factors of
Production so they decide what and how much
will be produced.
Command System answers to the
4 economic questions
3. Who Should produce what?
 The government decides who will do what job
and who will receive education to work in the
career chosen by the government.
4. Who Should share in what is produced?
 In theory all share evenly in the wealth of the
nation. In reality a very elite few become rich.
Pure Market or Capitalist
System
 The questions are answered
completely by Individuals.

The Government has no influence over how
the basic economic questions are answered.
 Market Systems:
 A pure market system does not exist
Market System answers to the 4
economic questions
1. How Should Goods and Services be produced?
 Individuals own the factors of production. Producers
search for the most productive mix of resources to meet
the Demand for a good or service. Demand is what
buyers are willing and able to buy.
2. What and how much should be produced?
 Producers of goods and services decide what and how
much should be produced, based on buyer’s Demand.
This message is communicated to Producers through
Market information.
Market System answers to the 4
economic questions
3. Who Should produce what?
 Individuals are free to sell their labor as they
wish. Access to education is available to those
who seek it.
4. Who Should share in what is produced?
 Access to goods and services is determined by
individual demand.
Mixed Economic Systems
 Mixed Economic System that leans toward
Market
 A market economy in which the government
makes laws that regulate business and may
even set some prices.
Buzzers get ready Mixed Economic
Systems that leans toward Market
United States of
America
Mixed Economic Systems
 Mixed Economic System that leans toward
Command
 A Command economy in which Individuals are
receiving some rights of ownership over the
factors of production.
Buzzers get ready Mixed
Economic system that leans
toward Command
Russia
Partner Questions!
Find your “Executive Branch” partner
and answer the following questions
 Write the questions and the answers you discuss on
separate sheet of paper. Title the paper Econ, Chapter
26, Section 1-2, Partner question.
1. Describe the kind of economic system the United States
of America is. Explain the difference this will make in
your lives.
2. Which of the Economic questions do you feel
government should have the least influence in and why?