Discovering Economic
Systems
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“No economy ever stands still.”
Sir Roy Harrod, The British Economy
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Student Expectation
Compare and contrast the types of economic
systems:
▫ Traditional economy
▫ Centrally-planned economy
▫ Market economy
▫ Mixed economy
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Traditional Economy
An economic system in which people do
things the way they have always done them.
A traditional economy is influenced by:
▫ Habits
▫ Customs
▫ Religious beliefs
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Traditional Economy Characteristics
An economic system heavily influenced by
habits, customs, and religious beliefs.
Children generally “inherit” the occupations of
their parents.
Difficult to introduce new ideas.
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Planned Economy
An economic system in which the
government controls and regulates
production, distribution, prices, etc.
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Planned Economy Characteristics
Not affected by financial downturns and
inflation.
Deliberate planning of the entire money-making
process for better results.
Emphasizes more on collective benefits, rather
the requirements of a single individual.
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Market Economy
A market economy is economy based on the
division of labor which the prices of goods and
services are determined in a price system set by
supply and demand.
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Market Economy Characteristics
Means of production are privately owned.
Buyers and sellers are solely responsible for the
choices they make.
Free market economy is also characterized by
free trade without any tariffs or subsidies
imposed by the government.
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Mixed Economy
A mixed economy can be defined as a
form of organization where the
elements of both capitalist economy
and socialist economy are found.
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Mixed Economy Characteristics
Factors of production, distribution, and other
types of economic activities are influenced
and/or controlled by both private industry and
governmental entities.
Members of private industry compete with the
objective of obtaining a profit.
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Discovering Economic Systems
Do you think that you
understand? Test your
memory. Complete
Discovering Economic
Systems Guided
Practice.
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TRADITIONAL
PLANNED
MARKET
MIXED
An economic system heavily influenced by
habits, customs, and religious beliefs.
Government directly influences and vastly
controls business practices due to
ownership of natural and capital resources.
Privately owned factors of production (i.e.,
factories and machines).
Prices are influenced by supply and
demand.
An economic system that combines
elements of all the other basic systems.
Characterized by very low unemployment
rate.
Considered synonymous with a capitalistic
economy.
Individual freedom is limited (roles of
individuals are static from generation to
generation).
Considered synonymous with either a
communist or socialist economy depending
upon the degree of government control.
Individual’s purchasing decisions
determines the types of products and
services offered.
Minimal government involvement in
business transactions
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Discovering Economic Systems
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Practice makes perfect!
The next activity proves that you understand.
Click the hyperlink to test your knowledge:
EconEd
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Discovering Economic Systems
14
You be the expert!
Discover economic systems worldwide.
Complete Discovering Economic Systems
Formal Assessment.
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Summary Review
• Name the four types of economic systems.
• What is the difference between traditional and planned
economic systems?
• What is the difference between market and mixed
economies?
• Most of the world’s countries have mixed economies.
Why is that?
• Give an example of four countries’ economic system, one
country for each economic type.
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Resources
Brown, Betty J., Clow, John E., & Brown, Kenneth W. (1995). Introduction to Business. New
York: Glencoe/Mac-Graw Hill.
market economy. (2009, December 24). In Wikipedia, The Free Encyclopedia. Retrieved 02:23,
December 28, 2009, from
http://en.wikipedia.org/w/index.php?title=Market_economy&oldid=333717399
planned economy. (n.d.). Dictionary.com Unabridged. Retrieved December 27, 2009, from
Dictionary.com website: http://dictionary.reference.com/browse/planned economy
economy. (n.d.). In Webster's New World Dictionary of Quotations. Retrieved December 28th,
2009, from http://www.yourdictionary.com/quotes/economy
command economy. In Economywatch.com. Retrieved December 28th, 2009, from
http://www.econedlink.org/lessons/index.php?lesson=EM322
mixed economy. In Economywatch.com. Retrieved December 28th, 2009, from
http://www.economywatch.com/world_economy/world-economic-indicators/mixed-economy.html
Comparative Economic Systems. In EconEdLink.org. Retrieved December 28th, 2009, from
http://www.econedlink.org/lessons/index.php?lesson=EM322
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