Economic Systems

Economic Systems

An economic system is the way in which a society organizes the production and distribution of goods and services.

​Economic systems can be divided into three different types: traditional, command, and market.

​In a traditional economy, the work that people do is based on long-established customs. People in these groups hunt, fish, and tend to animals and crops. Often, the focus of work is survival.

​The Inuit/Eskimo peopleof Canada use fishing techniques passed down over many generations

​In a command economy, the government controls the economy. The government decides what goods and services to produce, how and how much to produce, and how goods and services are distributed. It also gets wages and prices. Some economists refer to command economies as centrally planned economies.

​Food was scarce and expensive in this store in the former Soviet Union, a command economy

​The most common economic system used today is a market economy. A market economy is based on private ownership, free trade, and competition. Individuals and businesses are free to buy and sell what they wish, with little interference from the government. Prices are determined by the supply of and demand for goods.

​Advertisements, like these billboards in New York City, are common sight in a market economy.

​Few, if any, pure economic systems exist today. Most countries have mixed economies, which combine elements of traditional, market, and command economic systems.

Multiple Select

Which of the following are the names of the types of economic systems? (Check all that apply)

• Traditional

• Universal

• Command

• Market

Multiple Choice

Which economic system is based on customs and beliefs, people will do the same work as their parents, and the exchange of goods is through bartering (no money)?

• Traditional

• Command

• Market

• Mixed

Multiple Choice

Which economic system are all resources privately owned and the buyers and sellers answer the three economic questions?

• Traditional

• Command

• Market

• Mixed

Multiple Choice

Which economic system is both market and command combined and most democratic countries fall into this category?

• Traditional

• Command

• Market

• Mixed

Multiple Choice

Which type of economic system is it when the government decides what to produce, the government decides how to produce, and the government decides who gets the goods produced?

• Traditional

• Command

• Market

• Mixed

Multiple Choice

Which type of economic system is it when the market decides what needs to be produced, private businesses decide how to produce, and consumers decide what they are willing to pay for goods?

• Traditional

• Command

• Market

• Mixed

​Free Enterprise System

In the U.S. we have a free enterprise system. Under this system, Americans enjoy a number of freedoms. They are free to exchange goods and services and choose careers. They are also free to own and operate enterprises, or businesses, with little government intervention.

​Let's take a look at one American entrepreneur who took advantage of the free enterprise system. In 2006, eight yr old Madison had an idea to sell light up flip flops for kids. With financing from firends, she started her own company, Fish Flops. By 2013 she had over $1 million in sales to cover her college tuition!

​Government & Public Goods

​Today, federal, state, and local governments provide expensive or important services to large groups of people who might otherwise have to do without the service. These government goods and services are called public goods.

​The government pays for public goods with taxes they collect.

​This fighter fighter battles a raging fire to protect public safety.

​Economic Activities

​Every nation's economy includes a variety of economic activities. Economic activities are the ways in which people make a living.

​

Agricultural industries are primary activities that focus on growing crops and raising livestock. Fishing & mining are also primary activities. ​

​

​In manufacturing industries, people and businesses manufacture, or make, finished products from raw materials. For example, a furniture maker could use woods to make a table or chair.

​Some people work in wholesale industries, businesses that sell to businesses. They help move goods from manufacturer to market.

​Other people work in retail industries, businesses that sell directly to final customers.

​Still other workers, like healthcare workers and barbers, work in service industries. These are businesses that provide a service rather than goods.

Multiple Choice

Under a free enterprise system, businesses in the U.S. are allowed to do all of the following EXCEPT:

• decide what products to sell

• decide how to operate their business

• price their products

• they're allowed to do all of the above

Multiple Choice

What is an agricultural industry?

• an industry that sells things wholesale

• an industry that focuses on growing crops and raising livestock

• an industry that sells goods to customers

• an industry that provides a service to customers

Multiple Choice

What is a manufacturing industry?

• an industry where people & businesses make products from raw materials

• an industry where people fish and farm for a living

• an industry where people cut hair or work in a hosp

Multiple Choice

What is a wholesale industry?

• an industry where people fish or mine for a living

• an industry where people sell directly to the customer like Walmart

• an industry where businesses sell to businesses. Like Sam's Club or Costco

Multiple Choice

What is a retail industry?

• a business that sells directly to the consumer like Walmart or Walgreens

• a business that sells things in bulk to another business.

• a business that sells only one thing and only sells i

Multiple Choice

What is a service industry?

• a grocery store or mall

• a business that provides a service like a barbershop or hospital

• a business that provides goods like Amazon or White Castles

​Economic Indicators

​Economic systems and activities affect a country's economic development, or the level of economic growth and quality of life.

​Geographers group countries into two basic categories: developed countries & developing countries.

​To decide if a country is developed or developing, they use economic indicators to measure a country's wealth.

​Developed & Developing Countries

​Many of the world's wealthiest & most powerful nations are developed countries, countries with strong economies and high quality of life.

​

​Countries like the United States & Germany have a high per capita GDP & high quality of life and some of the best health & education systems in the world.

​One indicator is gross domestic product (GPD). Gross domestic product is the value of all goods and services produced within a country in a single year.

​Another indicator is a country's per capita GDP, or the total GPD divided by the number of people in a country. The per capita GPD allows us to compare incomes among countries.

​The world's poorer nations are known as developing countries. These countries have less productive economies and a lower quality of life. These countries have a lower per capita GPD than developed countries.

​

​People in developing countries have less access to health care, education, and technology.

​

​Guatemala, Nigeria, & Afghanistan are all developing countries.

Multiple Choice

Which of the following is an indicator of economic development?

• High illiteracy

• Unskilled labor force

• Gross domestic product per capita

• Under developed tertiary sectors

Multiple Choice

The greater the country’s level of economic development, the —

• higher the quality of life

• higher the agricultural labor force

• lower the cost of living

• lower the urban population

Multiple Choice

Most people in developing nations earn their living by —

• farming.

• hunting and fishing.

• working in manufacturing

  industries.

• working in service industries.

Multiple Choice

Stable Government

• Developed

• Developing

Multiple Choice

Unstable Government

• Developed

• Developing

Multiple Choice

Low GDP $

• Developed

• Developing

Multiple Choice

High GDP $

• Developed

• Developing

Multiple Choice

Long Life Expectancy

• Developed

• Developing

Multiple Choice

Short Life Expectancy

• Developed

• Developing

Multiple Choice

Better Health Care

• Developed

• Developing

Multiple Choice

Poor Health Care

• Developed

• Developing

Multiple Choice

Higher level industry

• Developed

• Developing

Multiple Choice

Lesser Industry

• Developed

• Developing

Multiple Choice

Agriculture Main Income

• Developed

• Developing

Multiple Choice

Serious Water Issues

• Developed

• Developing