Economic Systems

What is an Economy?Economy: The production and distribution of goods and services within a group of people.

Production: making thingsDistribution: the means by which people get things

Transportation and exchangeGoods: Physical products

Cars, Cell Phones, Computers, Food …Services: Something done by one person for another

Cell phone service, Education, Babysitting…

Economic SystemsAn Economic System is the means by which a people produce and distribute goods and services

Types of systems are:Traditional

MarketCommand

and Mixed

Traditional EconomyA traditional economy is one without money.Goods and Services are exchanged through “barter” For example:“I’ll teach your kid to read if you give me that cow”

Or“Give two chickens for this knife”Problem: Inefficient

Market EconomyIn a market economy money is used.Goods and Services are exchanged in the “marketplace” and purchased with money.How many goods and services are produced is determined by the demand for that good or service.This is also called a demand or capitalist economy. Problem: “Concentration of Wealth”The Rich get richer, the poor get poorer

Command EconomyIn a Command Economy the central government controls both production and distribution of goods and services.

Money may or may not be used.As the economy is planned by the Gov. this is also called a “planned economy,” or communismProblem:Economies are complex,

plans are imperfect As result overproduction and shortages result

Mixed EconomyIn a mixed economy money is used to produce and distribute goods and servicesMost of the economy is of the market type the government puts some controls on the economy through laws and regulation so that all

(alright most) people benefit.