Types of economics system.......... Four Types of Economic Systems: 1. Traditional Economy 2. Command
Economy 3. Market Economy 4. Mixed Economy (Market + Command) 1.
Traditional Economy An economic system in which economic decisions are
based on customs and beliefs People will make what they always made
& will do the same work their parents did Exchange of goods is done
through Bartering : trading without using money. Traditional
Economy Who decides what to produce? People follow their customs and
make what their ancestors made Who decides how to produce goods &
services? People grow & make things the same way that their
ancestors did Who are the goods & services produced for? People in
the village who need them. Traditional Economy Examples:
Villages in Africa and South America; the Inuit tribes in Canada; the
caste system in parts of rural India 2 Command System
Government makes all economic decisions & owns most of the property
Governmental planning groups determine such things as the prices of
goods/services & the wages of workers This system has not been very
successful & more and more countries are abandoning it Command Economy Who decides what to produce? Government makes all
economic decisions Who decides how to produce goods and services?
Government decides how to make goods/services Who are the goods and
services produced for? Whoever the government decides to give them to Command System Countries with communist governments have Command
economies Examples: Cuba, former Soviet Union, North Korea *Germany and
Russia have moved away from having a Command economy since 1991. Now
they have a Mixed economy. 3. Market Economy An economic
system in which economic decisions are guided by the changes in prices
that occur as individual buyers and sellers interact in the market place
Most of the resources are owned by private citizens Economic decisions
are based on Free Enterprise (competition between companies)
Important economic questions are not answered by gov. but by individuals
Gov. does not tell a business what goods to produce or what price to
charge. Market Economy Who decides what to produce?
Businesses base decisions on supply and demand and free enterprise
(PRICE) Who decides how to produce goods and services? Businesses decide
how to produce goods Who are the goods and services produced for?
consumers Market Economy There are no truly pure Market economies, but the United States is close. 4. Mixed Economy Market + Command = Mixed There are no pure command or
market economies. To some degree, all modern economies exhibit
characteristics of both systems and are often referred to as mixed
economies. Most economies are closer to one type of economic system.
than another Businesses own most resources and determine what and how to
produce, but the Government regulates certain industries. Mixed Economy Who decides what to produce? businesses Who decides how to
produce goods and services? Businesses, but the government regulates
certain industries Who are the goods and services produced for?
consumersMixed Economy Most democratic countries fall in
this category (there are no truly pure Market or Command economies).
Examples: Brazil, Mexico, Canada, UK, etc.
Which Economic System Is Best?
Market system has proven to be best because it promotes the goals of
growth, freedom, & efficiency Citizens are free to own their own
property and use it in the most efficient and profitable way Command and
Traditional systems sometimes offer more security, but are not nearly
as strong in efficiency, growth, freedom, and environmental quality
