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Modern Economic Systems
Bellwork: What is an Economic
 An economic system is the method used by a
society to produce and distribute goods and
How are Households similar to
 Like an Society, Households face many decisions.
 Who does which tasks? Who cooks dinner? Who does
laundry? Who chooses what TV show to watch? Who
cleans the bathroom?
 Like an Society, Households must allocate its scarce
resources amongst its various members, taking into
account each member’s abilities, efforts and desires.
 Like a household, societies faces many decisions
Similarities Continued…
 A society must decide what jobs will be done and who
will do them. (Farmers grow food, designers make
clothing, computer techs create software programs, etc)
 Both have to decide roles in order to get things
 Once society does this, they must decide the output of
goods and services that these people will produce.
What is Scarcity?
 Scarcity is the fundamental economic problem of
having unlimited human wants in a world of limited
resources. It states that society has insufficient productive
resources to fulfill all human wants and needs.
 Because of scarcity each economic system must answer
three basic economic questions. These questions are….
The Three Basic Economic Questions
 What to produce?
 How to produce?
 For whom to produce?
 Each economic system answers
these questions in different
What is capital? What is a Market?
 Capital is wealth in the form of money or other assets
owned by a person.
 This could be anything from land, money,
technology/equipment, which are then used to produce
goods and services.
 A market is a group of buyers and sellers of a particular
good or service.
Traditional Economic System
 Economic Decisions- relies heavily on habit,
custom, or ritual to answer the three economic
 Typically focus on one particular method of
livelihood such as hunting, agriculture and barter
 Role of Government-no specific role
 Ownership- None.
 Typically found in remote areas around the world.
(rural and farm-based).
Examples of Traditional
 Many of the African
countries which use
agriculture as their main basis
for growing food and for
 In addition some Asian
countries, such as
Bangladesh and Burma
also rely on farming as their
main way for both
employment and for
producing food for the
Market Economic System
 Economic Decisions-Based
on laws of supply & demand.
 Role of Government- No
Government intervention (pure
 Ownership -Owners of capital
are free to produce/sell
whatever quantities of any goods
for which they believe there is a
 Example -“Pure” market
economy does not exists. US is
Mixed Economic System
 All modern economic systems
are some type of mixed system.
 Economic Decision combines elements from
traditional, command, and
market systems.
 Role of Government -Range
of some level of Government
 Ownership -Some individual
ownership, some government
control or ownership.
 Some economic systems are
more heavily based upon one of
the basic forms of economic
systems than the others.
Examples of a Mixed Economy
 The U. S factors of production are
owned by the private sector, BUT
government does get involved in
 Determines what infrastructure will be
built, passes laws putting regulations on
private industry (EX: minimum wage
laws and anti-pollution laws).
 China’s government lets some
industries be controlled by market
forces, while at the same time totally
controls other (usually larger)
Command Economic System
 Economic Decision - based on planning by central
government planners.
 Government Role -Government is involved in all
aspects of economy and makes all decisions-what to
produce, how to produce it, and who to produce it
 Ownership -Government owns most, if not all
industries and businesses.
 Command economic systems are typically found
within communist political systems. Although no
“true” command economy exists today.
Closest Example of Command
• Cuba has had a communist
political system since 1959.
• The present Constitution also
ascribes the role of the Communist
Party of Cuba to be the "leading
force of society and of the state"
and as such has the capability of
setting national policy.
Examples of Economic systems
 Now that you have learned about each type of economic
system you are going to look at the examples on your notes
page and fill in the blank of each example with the correct
economic system.
 Then you and your group will then make up an example for
each on your own and place it in the correct economic
system category.
Exit Slip: Economic spectrum
 Now that you’ve learned about the different types
of modern economic systems we are going to
draw an economic spectrum on the board place
the vocabulary/countries listed in the correct
places where they lie in relation from command
to market system.
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