S. Holmes
ECONOMIC
SYSTEMS
Study guide
Advantages
Disadvantages
Traditional economy
Command economy
Market economy
3 economic questions are
answered by: Scarce
resources are used by ritual,
habit, or custom of people
 Stable & predictable
life
 Little uncertainty
over what, how, or
for whom to
produce
 Certain economic
roles for all
members of the
community
3 economic questions are
answered by: Central authority of
the Government (dictator,
president, or king)
 Change can happen
quickly & drastically for
economic production
 Public health services are
available for everyone
(little or no cost)
 Little uncertainty over
choice of career, where to
work, or losing job
3 economic questions are
answered by: People
(consumer/buyers &
Businesses/sellers)
 High degree of
freedom to make
choices
 Lack of government
interference
 Large variety of goods
& services
 Small degree of
government
interference
 Able to adjust
gradually to change
 Does not provide for
everyone’s needs
 Uncertainty for
workers & business as
a result of
competition & change
 Does not produce
enough public services
such as defense,
education, and
healthcare
 United States
 Japan
 Germany
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Examples of
countries
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Other
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Discourages new
ideas & new ways of
thinking and doing
things
Lack of progress
Lower standard of
living
Lack of innovation
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Does not meet wants and
needs of consumers
Reduce the quality of
goods (fill a quota)
Lack rewards or incentives
for people work & to
produce products
Restricts property rights
Little freedom
Central African
Mbuti
Australian
Aborigines
Inuit (Canada)
If your father was a
hunter then you
would be a hunter
Punish people who
act differently
Produce things that
have been produced
in the past, the way
it was produced in
the past
Whoever usually
received the
products will again
receive them
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Cuba
North Korea
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Government makes major
economic decisions
Government decides what
should be produced &
owns most of the means
of production
Government does the
planning for production
(factory locations,
occupations of workers &
their salaries)
Government controls the
distribution system for
housing, transportation,
consumer items
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US has a modified free
enterprise system
Often called
capitalism
Business leaders
choose the means of
production
Goal is to have the
most efficient and
profitable methods
Consumers incomes
determines who
receives which
goods/services