Economic Systems

How people and societies conduct the exchange

of goods and services around the world.

Economic Systems

Americans tend to have strong reactions to the following terms. On

your notes write down 2 or 3 characteristics that come to mind for

each of the following terms (it’s ok if you don’t know for sure, I

want to see what you know and think):

Free Enterprise (Capitalism)

Socialism

Command Economy (which we will call Communism)

Traditional Economy

Next, number 1-4 in your notes. Next to each number write the

economic system that you think goes with each phrase - using

Free Enterprise, Socialism, Communism, and Traditional.

1. From each according to his ability, to each according to his deeds.

2. From each according to his ability, to each according to his needs.

3. Production is privately owned & operated for profit, usually in

competitive markets.

4. Production is primarily for survival, but can be traded for other

necessary goods.

Economic Systems

Answers…

1. Socialism (From each according to his ability to each according to

his deeds.)

2. Communism (From each according to his ability to each according

to his needs.)

3. Free Enterprise (Production is privately owned and operated for

profit, usually in competitive markets.)

4. Traditional (Production is primarily for survival, but can be traded

for other necessary goods.)

Free Enterprise Fundamental Questions:

1. What should be produced?

2. How should it be produced?

3. Who gets it produced?

4. What are some advantages and disadvantages to this product?

Based on supply and demand

•Products are produced by privately owned businesses

•Very little government involvement

•Individuals with the means to purchase the goods receives the

product.

Who has the power? The consumer.

Socialism

•Based on what is needed for the greater good instead of what the

consumer desires.

•Products are produced by collective labor = those whom contributed

to the labor receive the finished product.

•Reduced incentives for the laborer, since achievement is rarely

rewarded.

•Who has the power? The laborers, as in the entire group, not the

individual.

Communism Similar to Socialism in that it is based on what is needed for the

greater good and NOT the individual.

•Products are the result of collective labor, and those with the

biggest NEED receive the finished product.

•The government or a small elite group typically owns factories,

businesses, and resource hubs.

• The government or group make all the decisions.

•This economy has many issues: such as the free rider.

•Who has the power? The government, or a small group of elites.

Traditional Traditional economies = less developed societies

•Technology or the environment restrict the large-scale production

of a good, and

•Usually consists of subsistence farming or hunting & gathering.

•The food grown by the individual farmer is used to survive, with

any leftovers or surplus being bartered for necessary goods such as

medicine.

•These economies can be perpetuated due to poverty or a sense of

cultural tradition.

Who has the power? If anyone, it is the individual producer, but a

lack of technology and wealth offset this power.

Free Enterprise Socialism

Communism Now, take what you have learned about these three economic

systems and use what you know about other countries to classify

each country into one of these economic systems using a chart

similar to the one below. What country NOT shown would you

classify as Traditional?

USA Cuba

Japan China

England Laos

Sweden Canada

N. Korea Mexico

Vietnam Norway

Free Enterprise

(Capitalism,

Free Market)

Socialism Command/

Communism

* - It’s important to understand that these countries have Communist governments,

yet claim to practice Socialist economic systems. However, based on their

economic practices, we know they use a Command, or Communist economy

system, although most are moving more to the left.

Free

Enterprise/Capitalism/

Free Market

Socialism Command/

Communism

USA Norway China*

Sweden Sweden Vietnam*

Canada Canada Cuba*

Japan North Korea*

England Laos*

Mexico

Production of Goods & Services

Subsistence Agriculture v. Commercial Agriculture

Subsistence: To feed you & your family. “survive”

Commercial: Enough to sell and make money. “profit”

Cottage Industries v. Commercial Industries

Cottage: Small, village, low output “family business not mobsters”

Commercial: Large Scale, high output “Corporation”

Levels of Economic Activities

Primary

Secondary

Tertiary

Quaternary

Number your paper from 1-10. For each of the photos we are

going to look at, write down what level of economic activity is

depicted, and what type of production type it is.

Attachment #2