1. Describe the characteristics
of the traditional, command
& market economies.
2. Explain the advantages &
disadvantages of the
traditional, command &
market economies.
• economy/ economic system
• traditional economy
• command economy
• market economy
• An organized way of providing
for the wants & needs of a
society’s people
• Fall under 3 main types:
1. Traditional
2. Command
3. Market
• Definition: Allocation of
scarce resources & other
economic activity is the
result of ritual, habit, or
custom
• Examples: many indigenous
peoples around the world
(Mbuti, Aborigines, Inuit)
• Advantages: Everyone knows
which role to play/ little
uncertainty exists over WHAT,
HOW, and FOR WHOM to
produce
• Disadvantages: 1. Tends to
discourage new ideas & new
ways of doing things 2. Lack of
progress leads to a lower
standard of living
• Definition: A central authority
(government) makes most of
the major economic decisions
• Examples: North Korea, Cuba
(currently); China, Soviet
Union (past)
Advantages
1. Dramatic change can occur
in a short period of time
2. Many health & public
services available to
everyone at little or no cost
Disadvantages
1. Does not meet the wants of consumers
2. Does not give people the incentive to
work hard
3. Requires large decision-making
bureaucracy
4. Little flexibility, can’t deal with small,
day-to-day changes
5. New & different ideas discouraged, no
room for individuality
• Definition: People & firms
act in their own best
interests to answer the
WHAT, HOW, and FOR
WHOM questions (free
enterprise)
• Examples: United States,
Canada, Japan, South Korea,
Great Britain, most of
Western Europe
Advantages
1. Can adjust to change over time
2. High degree of individual freedom
3. Small degree of government
interference
4. Decision-making is not concentrated
in the hands of a few
5. Incredible variety of goods &
services available to consumers
6. High degree of consumer
satisfaction
Disadvantages
1. Does not provide for the basic
needs for everyone in society
(young, old, disabled, etc)
2. Does not provide enough public
services that people value highly
3. Workers & businesses face
uncertainty resulting from
competition & change
4. Must guard against market
failure