types of economies. traditional economy in a traditional economy, roles and decisions are decided...
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Types of Economies
Traditional Economy
• In a traditional economy, roles and decisions are decided upon by custom
• Each person plays a specific role
• Some examples are: the Australian Aborigines, and northern Canada’s Inuits
Traditional Economy
• Advantages: everyone knows which role to play and there is little uncertainty about WHAT, HOW, and for WHOM to produce.
• Disadvantage: is the discouragement of new ideas and new ways of thinking. This leads to a lower standard of living than in other societies.
Question:
• How would your life be different if you were living in a traditional economy?
Command Economy
• In the command economy, a central authority (the government) determines WHAT, HOW, and FOR WHOM to produce
• Command economies include: North Korea, Cuba, the former Soviet Union and the People’s Republic of China.
Command Economy
• Advantages:– The ability to drastically change direction
in a relatively short period of time. – Many basic health and public services are
available at little or no cost
Command Economy
• Disadvantages:– Consumer needs may not be met– Hard work is not rewarded– The necessary decision-making bureaucracy
delays decisions– Little flexibility to deal with day-to-day problems– Individual initiative goes unrewarded
Market Economy
• In a market economy, producers and consumers determine WHAT, HOW and FOR WHOM to produce. In each market transaction, the consumers dollar acts like a “vote” making sure that producers continue to provide the goods and services that consumers want to buy.
Market Economy
• Examples of countries with a market economy: Japan, Canada, the United States, South Korea, Singapore and parts of Western Europe.
Market Economy
• Advantages: – Ability to adjust to change– Individual freedom– Minimum amount of government involvement in
economy– Ability to have a voice in economy– Variety of goods and services provided– Great consumer satisfaction
Market Economy
• Disadvantages:– Inability to meet every person’s basic needs– Inadequate job of providing some highly valued
services such as justice, education and health care
– High level of personal uncertainty – Sometimes economic failure
Question:
• Which economy do you believe is best and why?