III. Economic Systems •Every single society has an economic system. • The purpose of an economic system is to make and distribute goods and services. • The roles of individuals, businesses, and government vary in each system. • There are four basic economic systems: Traditional, Market, Command, and Mixed Traditional Economies •An economy where people make economic decisions based on their customs and habits. • needs and wants are usually established through hunting and farming. • This is usually the traditions of their ancestors • Culture is seen as more important than having a strong economy •People in traditional economies usually do not want to change their basic way of life. • In today’s world, traditional economies are not common Market Economies •An economy in which individual consumers and producers make economic decisions • This type of economy is also called capitalism, or free market. • Encourages people to start new businesses by giving them economic freedom Command Economies •In this form of government, the central government makes all economic decisions • also called a centrally planned economy • little or no economic freedoms for individuals • producers and consumers make very few basic economic decisions Mixed Economy •In reality pure market or command economies do not exist • most societies have mixed economies – different levels of government control • combines different elements of traditional, market, and command economic systems •The United States has about the closest thing to a pure market economy • However, it is still considered a mixed economy because of minor government regulations • For example, the government passes laws to protect the rights of consumers • The government also influences economic growth through jobs and services •Countries like North Korea have as close to a pure command economy as you can get, but are still considered mixed. • The government controls almost all economic decisions.