Standard 1Understand the fundamental

concepts relevant to the development of a market

economy

SS.912.E.1.3SS.912.E.1.3Compare how the various economic Compare how the various economic

systems (traditional, market, command, systems (traditional, market, command, mixed) answer the questions: (1) What to mixed) answer the questions: (1) What to produce?; (2) How to produce?; and (3) produce?; (2) How to produce?; and (3)

For whom to produce?For whom to produce?

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Characteristics of economic systems:Characteristics of economic systems:

TraditionalTraditional– Private property rights usually existPrivate property rights usually exist– Limited trading; usually barter tradeLimited trading; usually barter trade– Minimal use of price system or currencyMinimal use of price system or currency

MarketMarket– Private property rights are predominantPrivate property rights are predominant– Extensive tradingExtensive trading– Heavy emphasis on price systemHeavy emphasis on price system

CommandCommand– Private property rights are limited, at bestPrivate property rights are limited, at best– Moderate tradingModerate trading– Limited use of price systemLimited use of price system

MixedMixed– Various combinations of market and commandVarious combinations of market and command

TraditionalTraditional(1) What to produce?(1) What to produce?

Whatever is needed or desired by the householdWhatever is needed or desired by the household

(2) How to produce?(2) How to produce?

With the resources owned by the householdWith the resources owned by the household

Some borrowing or trading with neighborsSome borrowing or trading with neighbors

(3) For whom to produce?(3) For whom to produce?

The householdThe household

Perhaps some for tradingPerhaps some for trading

MarketMarket

(1) What to produce?(1) What to produce?

Whatever is desired by consumersWhatever is desired by consumers

(2) How to produce?(2) How to produce?

The most efficient and inexpensive wayThe most efficient and inexpensive way

(3) For whom to produce?(3) For whom to produce?

Whomever has the ability to payWhomever has the ability to pay

CommandCommand(1) What to produce?(1) What to produce?

Whatever the government decidesWhatever the government decides

Presumably some consumer demand is Presumably some consumer demand is consideredconsidered

(2) How to produce?(2) How to produce?

With the existing technology and resourcesWith the existing technology and resources

Much less incentive to innovate and reduce Much less incentive to innovate and reduce costscosts

(3) For whom to produce?(3) For whom to produce?

Whomever the government decidesWhomever the government decides

Whomever waits in lineWhomever waits in line

MixedMixed

Various combinations of market and Various combinations of market and commandcommand

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Focus: Understanding Economics in Civics and GovernmentFocus: Understanding Economics in Civics and GovernmentLesson 1 How Do Constitutions Shape Economic Systems?Lesson 1 How Do Constitutions Shape Economic Systems?

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Focus: Understanding Economics in US HistoryFocus: Understanding Economics in US HistoryLesson 2 Property Rights Among North American Lesson 2 Property Rights Among North American

IndiansIndians

Video: Stossel 2011 Property rights and Video: Stossel 2011 Property rights and the status of Native Americansthe status of Native Americans