Economics Recovery Unit 1: Fundamental Economic Concepts Lesson 3: Economic Systems What are the basic characteristics of economic systems? How do the basic characteristics of the free enterprise system, socialism and communism compare to each other? What are current examples of the free enterprise, socialist, and communist economic systems? What are their main characteristics? Why do all the following terms describe the U.S. economic system? Free Enterprise Free Market Capitalism What are the basic characteristics of economic systems? Property rights People may control the things they own as they wish. What are the basic characteristics of economic systems? Incentives Something that motivates an individual to perform an action. What are the basic characteristics of economic systems? Economic Freedom The freedom of people to make their own economic decisions. What are the basic characteristics of economic systems? Competition Buyers force sellers to bid against one another for the lowest price. Sellers force buyers to bid against one another for the highest price. What are the basic characteristics of economic systems? Role of Government ProtectorProtects buyers from unsafe products and false claims ProviderProvides services like education and defense RegulatorEnforces rules to insure fair competition PromoterEncourages the will of the majority Free Enterprise (Also called Free Market or Capitalism) In a free enterprise system, the production of goods and services is decided by the demand from consumers. Private individuals and groups decide what is to be produced, how much will be produced, and the prices that will be charged. Government owns People own How do the basic characteristics of the free enterprise system, socialism and communism compare to each other? Communist In a communist system, a type of command economy, the economy is controlled by the government and nearly all economic decisions are made by government leaders. In a communist system, decisions are often made with social and/or political goals in mind. Government ownsPeople own How do the basic characteristics of the free enterprise system, socialism and communism compare to each other? Socialist In a socialist system, a type of mixed economy, the government owns and runs some industries (such as banking or health care) while private individuals or groups operate others parts of the economy. Government ownsPeople own How do the basic characteristics of the free enterprise system, socialism and communism compare to each other? What are current examples of the free enterprise, socialist, and communist economic systems? What are their main characteristics? FREE ENTERPRISE COMMUNISTSOCIALIST United States North Korea Sweden Why do all the following terms describe the U.S. economic system? Free Enterprise Free Market Capitalism Free Enterprise = Free Market = Capitalism Directions: In your own words, describe each economic system. Draw a picture showing what it looks like. Free Enterprise Socialism Communism