Economic SystemsEconomic Systems

Who runs things Who runs things around here?around here?

66thth/7/7thth Grade Social Studies Grade Social Studies

Mrs. Samples Mrs. Samples

SS6/7E5aSS6/7E5a

a. Compare how traditional, a. Compare how traditional, command, and market command, and market economies answer the economies answer the economic questions of economic questions of 1. What to produce1. What to produce2. How to produce2. How to produce3. For whom to produce 3. For whom to produce

GPS: SS6/7E5GPS: SS6/7E5

The Student will analyze different The Student will analyze different

Economic Systems.Economic Systems.

E.Q. – How can I understand the E.Q. – How can I understand the 3 major Economic Systems?3 major Economic Systems?

What is an Economic System?What is an Economic System?

The way in which a nation The way in which a nation uses its resources to uses its resources to satisfy the people’s needs satisfy the people’s needs and wants.and wants.

Answers three basic questions:Answers three basic questions:

1.1. What will be produced - what kinds of What will be produced - what kinds of goods and services to produce (Food or goods and services to produce (Food or Car, airplanes, Equipment)Car, airplanes, Equipment)

2.2. How will it be produced - how these How will it be produced - how these good are to be produced. Workers or good are to be produced. Workers or Mechanized machinery Mechanized machinery

3.3. For whom will it be produced - how the For whom will it be produced - how the goods and services will be distributed goods and services will be distributed among the peopleamong the people

Traditional Economic SystemTraditional Economic System Society (the world we Society (the world we

live in) and culture live in) and culture determine how goods determine how goods and services are and services are made, sold, and made, sold, and bought.bought. Families, clans, or Families, clans, or

tribes follow certain tribes follow certain customs to satisfy customs to satisfy their basic needs.their basic needs.

Children often went Children often went into the same type into the same type of job as their of job as their parentsparents

Traditional Economy (cont’d)Traditional Economy (cont’d)•Based on primitive Based on primitive methods and toolsmethods and tools•Subsistence farming, Subsistence farming, as well as herding as well as herding cattle and hunting cattle and hunting and gatheringand gathering•Make their own Make their own clothing and toolsclothing and toolsTrade surplus for Trade surplus for goods made by goods made by othersothers•Found today in Found today in underdeveloped, underdeveloped, agricultural parts of agricultural parts of South America, Asia, South America, Asia, and Africa.and Africa.

TRADITIONAL ECONOMY (cont’d)TRADITIONAL ECONOMY (cont’d) What is produced What is produced

and what each and what each person does is person does is determined by determined by birth. A person birth. A person might be expected might be expected to do what his to do what his father did. father did.

The share of The share of wealth is wealth is determined by determined by custom or one's custom or one's position in society.position in society.

Command Economic SystemCommand Economic System The government decides what The government decides what

goods will be produced, how goods will be produced, how they will be produced, and how they will be produced, and how they will be distributed. they will be distributed.

The individual has very little say The individual has very little say as to how the basic economic as to how the basic economic questions are answered questions are answered

What is produced and what What is produced and what each person does might be each person does might be determined by a small group of determined by a small group of individuals.individuals.

Health, education, Health, education, and transportation is and transportation is available to all at little available to all at little or no cost to the or no cost to the people.people.

Everyone receives Everyone receives similar pay so they similar pay so they don’t work hard or go don’t work hard or go beyond what’s beyond what’s expected of them.expected of them.

Example: CarsExample: Cars The government The government

decides:decides: What type of cars will What type of cars will

be madebe made How many will be How many will be

producedproduced Which colors they will Which colors they will

be produced inbe produced in The price they will be The price they will be

sold forsold for

Market Market EconomyEconomy An economic system An economic system

based on individual based on individual choicechoice

What is produced and What is produced and what each person what each person does is based on does is based on supply and demand.supply and demand.

Sellers decide for Sellers decide for themselves what themselves what goods and services goods and services will be produced.will be produced.

MARKET ECONOMIC SYSTEMMARKET ECONOMIC SYSTEM

Individuals decide for Individuals decide for themselves the answers to themselves the answers to the basic economic the basic economic questions. questions.

The United States is The United States is classified as a market classified as a market economy.economy.

Jimmy Choo

Mixed EconomyMixed Economy

An economic system that has An economic system that has features of traditional, command, features of traditional, command, and market systemsand market systems

Countries with mixed economy try to Countries with mixed economy try to use the best parts of each system use the best parts of each system

Government and market makes Government and market makes decisions about what is made, how decisions about what is made, how much things cost, and how much much things cost, and how much people are paidpeople are paid

Answer these questions with a Answer these questions with a partnerpartner

How does the individual benefit from a How does the individual benefit from a market economy?market economy?

Why is there little social mobility Why is there little social mobility (moving up in society) within a (moving up in society) within a traditional economy?traditional economy?

How might an individual benefit from How might an individual benefit from a command economic system?a command economic system?

What are the basic questions that all What are the basic questions that all economic systems must answer?economic systems must answer?

ACTIVITYACTIVITY Create a chart in which you Create a chart in which you

would compare and contrast would compare and contrast the similarities and the similarities and differences between a differences between a COMMAND and MARKET COMMAND and MARKET economy. As you complete economy. As you complete your chart, keep in mind the your chart, keep in mind the three basic economic three basic economic questions that ALL economic questions that ALL economic systems must answer............systems must answer............ WHAT TO MAKE ?WHAT TO MAKE ? HOW TO MAKE IT ?HOW TO MAKE IT ? WHO GETS IT ?WHO GETS IT ?