Lesson 3

Types of Economic Systems

is the way a country organizes the production, distribution, and consumption of goods and services.

Since resources are limited. It is how a country organizes its resources to meet people’s needs and wants.

Economic System answers the basic questions:

is one where economic decisions are guided by customs and traditions, people produce mainly for their own use, and bartering is common.

Key Features of Traditional Economy

People do things the way they have always been done.

Goods are often exchanged without money.

People produce mostly for their own needs, not for selling.

They use simple tools and methods

an economic system in which the government controls resources and makes all the major decisions about what to produce, how to produce it, and for whom to produce.

People and private businesses have little or no control over economic decisions.

The government decides what goods and services are needed, how much to produce, and how to distribute them.

Prices and wages may also be set by the government instead of the market.

The government controls resources, industries, and businesses

Key Features of Command Economy

The government owns most resources and businesses.

Production and distribution are decided by the central authority.

People cannot freely choose products or services.

The government may prioritize certain industries or social objectives over profit.

Example of a country that have a command economy

(also called a capitalist economy) is an economic system in which individuals and businesses make most of the economic decisions.

The government plays a limited role, and resources are allocated based on supply, demand, and competition.

Key Features of market economy

Example of a country that have a market economy

is an economic system that combines elements of both a market economy and a command economy.

a system where both private businesses and the government share control of economic decisions.