moscow 1988 · 2015. 1. 14. · of toilet paper? moscow 1988 . economic system $ every society has...
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Why would people stand in line all day for one roll
of toilet paper?
Moscow 1988
ECONOMIC SYSTEM $
Every society has an
economic system in
which people make and
distribute goods and
services.
WHAT IS AN ECONOMIC SYSTEM?
An economic system describes how a society determines what to produce, how to produce, and for whom to distribute goods and services.
5
What will be produced?
How will it be produced?
For whom will it be produced?
In any type of economic systems 3 basic
questions must be answered.
THE 3 ECONOMIC SYSTEMS
Traditional
Command
Market
TRADITIONAL ECONOMIC SYSTEM
• Traditional economic
system is a community based
system in which all factors of
production rely on customs,
and beliefs.
• There is very little change.
• Trade is usually very limited.
• Today traditional economies are
not common.
What? Tradition, customs,
and beliefs decide what goods
and services will be produced.
How? Tradition, customs,
and beliefs decide how goods
and services will be produced.
For whom? For people
who live in the community or
the village.
TRADITIONAL ECONOMIC SYSTEM
COMMAND ECONOMIC SYSTEM
In a command
economy the
factors of
production is
owned and
controlled by the
government.
COMMAND ECONOMIC SYSTEM
.
What? The government decides
what products are needed.
How? Since the government
owns all means of production, it
decides how goods and
services will be produced.
For whom? The government
decides who will get what is
produced.
MARKET ECONOMIC SYSTEM
In a market economic
system the factors of
production is controlled
by individuals or
corporations.
MARKET ECONOMIC SYSTEM
What? Consumers and
producers decide what should
be produced.
How? Consumers and
producers decide how to
produce.
For whom? Consumers.
IMPORTANT!
Traditional economies only make up a small part of a
country’s economy.
There are NO PURE Market economies in the world
There are NO PURE Command economies in the world.
All economies in the world have
aspects of both command and
market.
THEREFORE…
All modern economies in the world are MIXED economies.
But the mix is different in every nation.
PURE
MARKET
100%
PURE
COMMAND
0%
Russia
50%
Germany
71%
United
Kingdom
74%
In which country do you think it would be the
easiest to start a business?
USA
77%
74.1 71
50.1
COMPARING MIXED ECONOMIES United Kingdom, Germany, and Russia
Percentage of Market
0
10
20
30
40
50
60
70
80
90
100Economic Freedom Index
What is Economic Freedom? Economic freedom is the key to a greater quality of
life. It’s the freedom to choose how to produce, sell,
and use your own resources, while respecting others’
rights to do the same. Economic freedom is an engine
that drives GDP and is the difference between why
some countries prosper while others do not.
IDENTIFY THE ECONOMIC SYSTEM
The Inuit of northern Canada serve as a prime example
of a ___________economy. For thousands of years,
the Inuit parents have taught their children the survival
skills needed to survive in the Arctic Circle's severe
climate. The children are taught to fish, hunt, and make
effective tools. Once learned, these skills are passed
down to the next generation. When the Inuit hunt, it is
traditional for them to distribute the harvest with
other families in the community.
REVIEW
True of False.
The economies of Germany, Russia, and
the United Kingdom have aspects of both
command and the market economic
systems. Explain.
REVIEW
An entrepreneur is someone who
starts their own business. In a
command economy entrepreneurs
rarely exist. Why?
REVIEW
Which economic system
is the MOST centralized?
REVIEW
This picture BEST represents a _______ economic
system.