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ECONOMIC SYSTEMS

ECONOMIC SYSTEMS. In this chapter, we learned about economic resources, and how there was a limited supply of those resources. We learned we had to choose between our wants in order to use the resources effectively.

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ECONOMIC SYSTEMS

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  1. ECONOMIC SYSTEMS

  2. In this chapter, we learned about economic resources, and how there was a limited supply of those resources. We learned we had to choose between our wants in order to use the resources effectively. Those limited resources are the same reason every nation must answer 3 questions.. .

  3. What IS an economic system? • An organized way of providing for the wants and needs of the people within a society. in other words, it answers those 3 key economic questions

  4. What goods and services should be produced? How should they be produced? For whom should they be produced?

  5. WHAT to produce? • can’t please everybody all the time • must use resources effectively • ex. find balance between military and consumer goods

  6. HOW to produce? • same solution doesn’t work for everyone • use what you have--answers often based on availability of economic resources • ex. building a road (capital vs. human labor)

  7. FOR WHOM to produce? • not all are created equal--must decide who benefits • purchase power may be limited if consumer goods are not at the top of the list • ex. tractor production

  8. There are 3 types of economic systems: • custom-based economy (also called traditional) • directed (planned) economy • market economy

  9. CUSTOM BASED ECONOMY • country usually less developed • goods produced the same way forever (traditionally) • tools are simple and use people/animals for energy • growth is slow

  10. DIRECTED (PLANNED) ECONOMY • resources owned/controlled by gov’t • gov’t says what to produce and how to produce it • this extends to military as well as capital goods • may resort to police force to carry out economic wishes • freedom in this society is typically limited

  11. MARKET ECONOMY • country typically has democratic gov’t • consumers and businesses choose what to buy and sell based on their own interests • money is exchanged for goods/services • no one tells consumer what to buy or tells a business what to sell • ex. movie/mail order/tennis lessons

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