Types of Economic Systems

Name ______Date ______Economics Unit 2 - Chapter 2

Economic Systems

• Economic system:

• Three basic systems:

• TYPE 1:

 ▫

Characteristics of Traditional Economies

• Advantages and Disadvantages

▫ Advantages:

▫ Disadvantages:

 low productivity results in low standard of living

• TYPE 2:Command Economy

▫ 

Government Controls

• EXAMPLE: Socialism and Communism

▫ Karl Marx influenced some societies to adopt command economies

 socialism—

 communism—

▫ Authoritarian system requires total obedience to government

 • Socialism and Communism

▫ Democratic socialism established under democratic political process

Karl Marx: Economic Revolutionary

• A New View of Economics

 ▫ Wrote The Communist Manifesto (with Friedrich Engels), Das Kapital

Command Economies Today

 modern telecommunications bringing about change

North Korea

▫ Communist North Korea used resources for military, not necessities

• Impact of Command Economies ▫ In theory, command systems fair to everyone; In practice, many disadvantages

 workers have little motivation to be productive or conserve resources

 people sacrificed to carry out centrally planned policies

• TYPE 3: Market Economy

▫ Today’s Mixed Economies

 most common type of economic system

▫ Traditional, command, market economies adopt elements from others

Life in a Mixed Economy

 traditional:

 command:

 market: Today’s Mixed Economies

▫ European countries greater mix of market and command elements

 France—

 Sweden—

 Namibia—

Trends in Modern Economies

• Changes in Ownership

▫ Nationalize

▫ Privatize

Increasing Global Ties ▫ Growth of global economy:

 recent agreements open up world markets to trade among countries

 phone, computer links make financial transactions quick, inexpensive