Economic
Systems
Economic System vs. Form of
Government
A. Economic System:
The way goods and
services are produced
and distributed in a
country.
B. Form of Government:
The way a country
makes, enforces, and
interprets laws.
Key Terms/Ideas
A. Consumer: an individual who uses goods
and services in an economy.
B. Private Property: any material
possessions that individuals own
C. Freedom of Enterprise: the right of a
business or individual to make economic
choices. Fuels competition and provides
consumers with options.
D. Role of Government: how involved is the
government in the economy
Traditional Economy
A. An economic system in which
decisions on production and
consumption are based on
customs, beliefs, rituals, and
habits. People do things they
way they always have.
B. A traditional economic system
is likely to be found in
countries that are not as
developed as a place like the
United States.
C. A good example would be a
Native American tribal
economy.
Market Economy
A. An economic system in which
decisions on production and
consumption are made by
individuals acting as buyers and
sellers.
B. Capitalism and free-enterprise
are terms that also refer to market
economies.
C. Individuals are allowed free
enterprise, the opportunity to
make their own economic choices
including taking risks to make
profits.
D. The U.S. economy is based on a
market or capitalist system.
Command Economy
A. An economic system in which all
decisions on production and
consumption are made by a
central government.
B. The economic systems of most
communist nations are
command economies, because
the government makes all
economic decisions.
C. The best example of a command
economy and communism is the
former Soviet Union.
D. The U.S. economy during WWII
is also an example.
Mixed Economy
A. An economic system that
combines features of the
command and market
systems.
B. Democratic socialism is
an example of a mixed
economy. A democratic
socialist system has
characteristics of both
market and command
systems.
C. Most countries of the world
fall into the mixed category.
Journal: Economic Systems Notes
•
•
Which forms of government would
match up best with a market economy?
Why?
Which forms of government would
match up best with a command
economy? Why?
Economic Systems and Forms of
Government Compatibility
A.
B.
C.
Certain governments match up well with
certain economic systems.
Democratic governments often have a
market based system. They fit well together
because they both allow a lot of freedom for
the people.
Authoritarian governments, like
dictatorships, often fit well with a command
based system, because they both rely on
government control.