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ECONOMIC SYSTEMS

ECONOMIC SYSTEMS. How do we provide the wants and needs of society?. Economic systems. An organized way of providing for the wants and needs of their people We have 3 basic ways to answer this question Traditional Economies Command Economies Market Economies. Traditional Economy.

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ECONOMIC SYSTEMS

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  1. ECONOMIC SYSTEMS How do we provide the wants and needs of society?

  2. Economic systems • An organized way of providing for the wants and needs of their people • We have 3 basic ways to answer this question • Traditional Economies • Command Economies • Market Economies

  3. Traditional Economy • Why do we leave tips at a restaurant? • Why do we eat Thanksgiving dinner? • Why do we shake hands with strangers? • Why does the bride toss the bouquet at a wedding? • …………………………………………. • TRADITION, roles and economic decisions are defined by custom.

  4. Strengths Set economic roles for all members of the community Stable, predictable, and continuous life Weaknesses Discourages new ideas Stagnation and lack of progress Traditional Economy How would your life be different if you had grown up in a traditional economy?

  5. Command Economy • An economy in which a central authority makes most of the economic decisions. • These are found today in…………. • North Korea • Peoples Republic of China • Cuba • Former Soviet Union

  6. Strengths Capable of dramatic change in a short time Health and public services available at little or no costs Equality Weaknesses Does not meet wants and needs of consumers Lacks effective incentives for work Requires large bureacracy New and different ideas are discouraged Command Economy

  7. Command Economy • In what ways are traditional and command economies alike? • In what ways are they different?

  8. Market Economy • People and firms act in their own best interest to answer the basic economic questions • People’s decisions act as “dollar votes”. • Consumers answer the what • Ex. US, Canada, Japan, South Korea, Singapore, and parts of Western Europe.

  9. Strengths Can adjust to change gradually Individual freedom Notable lack of gov’t interference Decentralized decision making Variety of goods and services = Consumer  Weaknesses Rewards only productive resources Must guard against market failures Market Economy

  10. Exit Question • In the early 1990s many Eastern European nations moved from a Command Economy to a Market Economy. What problems do you think they faced during the transition? • How are the WHAT, HOW, and FOR WHOM answered in the 3 economic systems?

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