3 Economic geography deals with how people earn a living and use resources. Today, we will learn about 3 types of economic systems that are used in different countries.
4 Economic Systems Command (Free) Market Traditional (Planned) Communism Socialism(Free) MarketCapitalismTraditional
5 Important Note:No country has a pure market, command, or traditional economy. Most places have mixed economies.
6 Economic Questions What and how many goods/services will be produced? How will these products be produced?How will the products be distributed?Where are these economies located?
7 Market Economy What and how many goods/services will be produced? People (consumers) determine what and how many products will be produced based on buying power and lack of buying power.
8 Market Economy 2. How will these products be produced? Based on consumer needs. (Goods produced by private industries and limited government involvement.)Free enterprise = lets competition among businesses determine the price of products
9 Market Economy 2. How will these products be produced? -Commercial Agriculture-Commercial Industries: Goods are mass-produced in factories for sale by businesses to consumers
10 Market Economy 3. How will the products be distributed? Based on consumer needs and supply and demand. People freely choose what to buy and sell.
11 Market Economy 4. Where are these economies located? United States, throughout EuropeMost of the world’s rich countries (developed) have market economies
12 Example of a market economy: Capitalism - businesses, industries, and resources are privately owned
13 Which is a central characteristic of a free market economy? The government owns the means of productionAll wage earners are paid the same amountLabor unions are prohibitedBusinesses are driven by the desire for profits
14 Command EconomyGovernment planners answer ALL economic questions. Government planners determine what will be made, how much workers are paid, and how much things will cost.
15 Command Economy 4. Where are these economies located? China, Cuba, North Korea
16 Example of a command economy: Communism - the government owns or controls almost all the means of production
17 Farmers Government officials Consumers Business leaders Which group has the greatest influence in determining what goods and services will be produced in a communist economic system?FarmersGovernment officialsConsumersBusiness leaders
18 Important Note:No country has a pure market or command economy, but instead lies somewhere on the spectrum between the two. Around the middle, you have Socialism
19 SocialismFalls between Communism and Capitalism in terms of government control.Some industries may be government owned, other businesses are privately owned.
20 Socialism Taxes are generally very steep Many social services are provided free: education, health-care, child-care, etc.Both France and Sweden are examples of Socialist economies.
21 In a socialist economic system, the government— Has little say in what goods are madeDoes not influence the distribution of goods and servicesGuarantees all consumers a high incomeOften owns major businesses
22 Lesser developed countries tend to practice an entirely different economic system…
23 Traditional Economy (subsistence) What and how many goods/services will be produced?The goods produced are the essentials to survive: food, clothes, etc. People usually only provide enough for themselves and their family.
24 Traditional Economy (subsistence) How will these products be produced?Families produce what they can based on the resources available to them.Generally, people do what their ancestors did. These customs have been carried down from one generation to the next.
25 Traditional Economy (subsistence) How will these products be produced?-Subsistence Agriculture-Cottage Industries: Goods are made by hand in homes or small workshops for family or local use.
26 Traditional Economy (subsistence) 3. How will the products be distributed?Goods are distributed among the family. There is little surplus or exchange of goods. As a result, there are few markets (places to buy and sell things).
27 Traditional Economy (subsistence) 4. Where are these economies located?Poor countries (developing countries) and rural areasExamples: Many countries in Africa, Central and South America
28 Which statement describes an aspect of a traditional economy? Profit motivates individuals to set up private businessesThe interplay of supply and demand regulates pricesTradition and customs greatly influence economic decisionsGovernment directs and controls the means of production
29 Traditional Free enterprise Socialist communist In Indonesia, the government owns large industries and sets some prices. However, private businesses are also encouraged and several hundred are actively traded on the Indonesian Stock Exchange. This country’s economy system can best be classified as—TraditionalFree enterpriseSocialistcommunist
30 Which is a major feature of an economy based on subsistence farming? Most adults work outside the homeFarmers compete with each otherFarmers raise just enough crops for their family to surviveThe government decides which crops will be grown
31 Types of Economic Systems Characteristics of a Free Enterprise Economy Which heading best completes the partial outline below? I. _____________________ A. Interaction of Supply and Demand B. Profit Incentive C. EntrepreneursTypes of Economic SystemsCharacteristics of a Free Enterprise EconomyStructure of a Socialist Economic SystemCottage Industries