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Types of Economies

Types of Economies. CE.11b. Questions. What are the basic economic questions all societies must answer?  What are the basic characteristics of traditional, free market, command, and mixed economies? How does each type of economy answer the three basic questions?. Basics of Economics.

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Types of Economies

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  1. Types of Economies CE.11b

  2. Questions • What are the basic economic questions all societies must answer? •  What are the basic characteristics of traditional, free market, command, and mixed economies? • How does each type of economy answer the three basic questions?

  3. Basics of Economics • Every country must develop an economic system to determine how to use its limited productive resources. • The key factor in determining the type of economy a country has is the extent of government involvement.

  4. Basics of Economics The three basic questions of economics • What will be produced? • Who will produce it? • For whom will it be produced? Each type of economy answers the three basic questions differently. Characteristics of major economic systems • No country relies exclusively on markets to deal with the economic problem of scarcity. Every country must develop an economic system to determine how to use its limited productive resources. The key factor in determining the type of economy a country has is the extent of government involvement.

  5. Traditional Economy Traditional economy • Economic decisions are based on custom and historical precedent. • People often perform the same type of work as their parents and grandparents, regardless of ability or potential.

  6. Free Market Economy Free market economy • Private ownership of property/resources • Profit motive • Competition • Consumer sovereignty • Individual choice • Minimal government involvement in the economy

  7. Command Economy Command economy • Central ownership (usually by government) of property/resources • Centrally-planned economy • Lack of consumer choice

  8. Mixed Economy Mixed economy • Individuals and businesses are owners and decision makers for the private sector. • Government is owner and decision maker for the public sector. • Government’s role is greater than in a free market economy and less than in a command economy. • Most economies today, including the United States, are mixed economies.

  9. Review • Compare the differences among traditional, free market, command, and mixed economies.

  10. Vocabulary

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