A unit about Traditional, Market, & Command Economies.

Three little Questions

• When developing the economic plan, each country must ask three basic economic questions:

1. What goods/services will be produced?2. How will goods/services be produced?3. Who will consume the goods/services?

The way a country answers these questions determines what kind of economic system it will have:

1. Traditional 2. Command 3. Market4. Mixed

Traditional Economy

• All economic decisions are based on customs, traditions, & beliefs of the past.

•People will make what they always made & do the same things their parents did.

•The exchange of goods is done through bartering.

•Bartering = trading without using money

•Some Examples: villages in Africa & South America, the Inuit in Canada, Aborigines in Australia

Traditional Economy

Let’s see how a traditional economy fits in with the 3 economic questions…

1. What goods/services will be produced?• People follow tradition & make

what their ancestors made.2. How will goods/services be

produced?• People produce goods the same

way that their ancestors did.3. Who will consume the

goods/services?• People in the village who need

them.

Command Economy•The government owns resources•It also controls production of goods, prices, and wages.

•Prices of goods are set low by the government which leads to shortages

•Many resources are used for military goods

Command Economy

Let’s see how a command economy fits in with the 3 economic questions…

1. What goods/services will be produced?• Government decides what will be

produced.2. How will goods/services be

produced?• Government decides how to make

them.3. Who will consume the

goods/services?• Whoever the government decides

to give them to.

Market Economy

• In a truly free market economy, the government would not be involved at all. Scary…

•There would be no laws to make sure goods/services were safe. *Food and Medicine•There would be no laws to protect workers from unfair bosses.

•Because of this, there are no PURE market economies, but some countries are closer than others.

• Some Examples: US, UK and Australia

Market Economy

Let’s see how a market economy fits in with the 3 economic questions…

1. What goods/services will be produced?• Private businesses

2. How will goods/services be produced?• Private businesses

3. Who will consume the goods/services?• Consumers

Mixed Economy• This type of economy has companies owned by both citizens and the government

• Citizens own the majority of resources

• Citizens decide what to produce and how

• Certain industries are regulated by the government

Let’s see how the Mixed Economy fits in with the 3 economic questions•1. What goods and services will be produced? Most decisions are made by individual businesses

•2. How will goods and services be produced? Most decisions are made by individual businesses

•3. Who will consume the goods and services? Consumers

The Economic Timeline (copy this on the back of your notes)

Command Mixed Market

North Korea

USUKGermany

Russia Australia

Numbered Heads Together

The government makes ALL economic decisions.

If your parents were peanut farmers, then you would be a

peanut farmer also.

Most democratic countries are this.

North Korea is closest to having this type of system.

Private businesses determine what goods/services are

produced and how they will be made.

Bartering is used.

Communist countries are closely related to this.

Businesses make economic decisions, but the government regulates them to make sure

they’re safe/fair.

Australia is close to this.

Government controls all aspects of the market.

Based on the bartering system

Let’s Review1. What are the three basic questions that every

economic system must answer?2. What are the three economic systems?3. Which economic system allows for the most

individual freedom?4. In which economic system does the government

have the most control?5. In which economic system do individuals do

things based on customs & beliefs?6. What is the economic system of most

communist countries?7. How do traditional economies exchange goods?8. Which country is closest to a true Market

economy?9. Most democratic countries have which type of

economic system?

Your opinion

Use your Economic Systems Guided Notes to write a 5 sentence paragraph that answers this question:

Which economic system do you think is best?

Make sure that you give specific details from your notes supporting why you

chose this economic system as your 3 evidence

sentences.

Scoring Guide for Paragraph

•Focus: Addresses prompt appropriately and maintains a clear, steady focus and provides a generally convincing position. Score 1-3

•Reading/Research: Accurately gives details from reading materials that applies to the purpose of the prompt/claim. Score 1-3

•Development: Presents appropriate and sufficient details to support/develop the claim Score 1-3

•Your score on the three categories will be added and divided by 3 for your final score.