ECONOMIC SYSTEMS

Who makes the decisions within each economic system?

BRAINSTORM ACTIVITY On your notes page, list 2 things you

already know or want to know about the four economic systems.

Traditional Free Enterprise Communism Socialism

ECONOMIC QUESTIONS Every society has limited resources. This means no society has enough

goods and services to meet the needs of everyone.

Because of this, each society must answer three economic questions.

ECONOMIC QUESTIONS What should be produced?

How should it be produced?

Who should get it?

ECONOMIC SYSTEMS The way in which society answers the

economic questions is known as its “economic system.”

Traditional

Free Enterprise

Communist

Socialist

ECONOMIC SYSTEMSTRADITIONAL – MAIN FEATURES Economic Decisions – custom and

tradition determine what should be produced, how it should be produced and for whom.

Production – based on custom and time-honored methods. New ideas are discouraged. Very little change or growth.

Private Property – no private property. Things are owned by the family or village.

Trade – goods and services are produced to meet the needs of the members of the family or tribe only. No trade with outsiders.

ECONOMIC SYSTEMSTRADITIONAL - EXAMPLES Mostly found in rural, non-industrial

areas Bushmen of the Kalahari Desert of South

Africa Berber tribesmen of Algeria Villages in South Asia

ECONOMIC SYSTEMSFREE ENTERPRISE– MAIN FEATURES Private Property – people have a right to own

private property and use this property as they see fit with limited interference from the government.

Free Enterprise – people are free to take part in any business, buy any product or sell any legal product. Businesses can lower prices, provide better quality, advertise, etc. to attract customers.

Profit Motive – the ability to make profits is what drives people to risk their money to start a new business.

Supply & Demand – determines prices. When demand is high, the price goes up. If the supply is high but demand is low, the price goes down.

ECONOMIC SYSTEMSFREE ENTERPRISE - EXAMPLES Mostly found in countries with

commercial agriculture and commercial industries.

United States Great Britain Canada Japan Singapore Chile France Germany

ECONOMIC SYSTEMSCOMMUNISM – MAIN FEATURES Role of Government – all major decisions

on production, distribution and use of resources are made by the government.

Private Property – no private ownership. The nation or government owns all land, factories, farms and major resources.

Cooperation – all workers labor together and share equally.

Major Goal – to achieve a “classless” society – equality among all workers.

ECONOMIC SYSTEMSCOMMUNISM - EXAMPLES At one time there were MANY

communist countries, but they were unable to keep up with the goods created by free enterprise systems.

China – taking steps toward free enterprise.

North Korea Vietnam Cuba

ECONOMIC SYSTEMSSOCIALISM – MAIN FEATURES Role of Government – government uses its power

to bring an end to poverty by taking control of the major resources of the nation and providing public services.

Economic Decisions – many decisions about production, distribution and the use of resources are made by the government. Other decisions are made privately.

Private Property – major industries are owned by the government. Other property is owned privately.

Major Goal – seeks a fairer distribution of income among society. People’s basic needs are met for free at a very low cost. (healthcare, transportation, housing, education)

ECONOMIC SYSTEMSSOCIALISM - EXAMPLES After World War II, most countries in

Western Europe became Socialist, but many moved toward privatization in the 1980’s and 1990’s.

Sweden Israel

ECONOMIC SYSTEMSMIXED ECONOMIES In the real world, no economy TOTALLY

follows one economic system. Most countries have economies that

blend features of each. Countries can be classified on a

spectrum ranging from free enterprise to communist based on how much control the government has.

Free EnterpriseCommunism

Socialism

ECONOMIC SYSTEMSWHO MAKES THE DECISIONS? On your notes page, use what you’ve

learned to fill in the “who makes the decisions” chart.

You make work with a partner. Then draw a picture representation of

each type of economic system. Next class period we will look at specific

countries and place them on a economic systems spectrum.

ECONOMIC SYSTEMSCASE STUDY You will be placed in groups of 4. Assign the following duties:

Time Keeper – keeps time and keeps group on task

Librarian – reads informationSecretary – gather materials and keeps

notes Illustrator – draws spectrum and records

countries ALL GROUP MEMBERS – PARTICIPATE IN

DISCUSSION

ECONOMIC SYSTEMSCASE STUDY Materials:

Country packet1 sheet of notebook paperPen/pencilButcher/construction paper1 or 2 markers

ECONOMIC SYSTEMSCASE STUDY Instructions:

Read each country’s economic informationDetermine what type of economic system

each country has and take notes over characteristics of each country

Draw an “Economic System Spectrum” on butcher/construction paper. (see example)

Review notes from each country and decide where each country should be placed on the spectrum

Be ready to support your group’s decisions