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Economic Systems

The document discusses different types of economic systems: 1) Subsistence economies focus on producing only enough for basic survival through small-scale agriculture and living off the land, resulting in low standards of living. 2) Centrally planned economies give the government control over resources and production, setting prices and allocating goods. 3) Free market economies rely on private ownership and minimal government intervention, allowing market forces of supply and demand to determine prices. 4) Mixed economies combine elements of free markets and government involvement in certain industries like utilities.

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17 views15 pages

Economic Systems

The document discusses different types of economic systems: 1) Subsistence economies focus on producing only enough for basic survival through small-scale agriculture and living off the land, resulting in low standards of living. 2) Centrally planned economies give the government control over resources and production, setting prices and allocating goods. 3) Free market economies rely on private ownership and minimal government intervention, allowing market forces of supply and demand to determine prices. 4) Mixed economies combine elements of free markets and government involvement in certain industries like utilities.

Uploaded by

ramnathsarah282
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Economic Systems

THE ECONOMIC PROBLEM

► The economic problem is that human beings always want more and are never completely
satisfied. Our wants are unlimited but our resources are limited. This results in scarcity and
so we must make choices. This creates an opportunity cost.
► This means that you can have one thing or the other. For example, you could go watch
television right now, or you could attend the class, you cannot do both at the same time. A
person may buy a car or go on a holiday, he may not be able to do both because, he would
not have enough money, so, he has to choose one.
Man is an Economic animal
TYPES OF ECONOMY OR ECONOMIC
SYSTEMS
SUBSISTENCE ECONOMY

In the Subsistence Economy one would find:


► Persons produced goods to meet only their most basic needs and that of their
families.
► People produced only enough for survival.
► There were mainly small-scale agricultural activities.
► People lived off what was obtained from the land/natural resources.
► Many had a very poor quality of life.
Subsistence Economy

► Producing goods was inefficient and dependent on climate & weather.


► Though it still exists this type of economy is not as common as was seen in the
past.
► eg. People of the Amazon Rainforest
► This type of economy existed with early man where he satisfied all his needs &
wants by himself without the help of outsiders. The standard of living (the things
that make life comfortable) was generally low.
CENTRALLY PLANNED / COMMAND /
COLLECTIVIST / SOCIALIST
ECONOMY

(eg. China, Cuba, North Korea)


► The government owns and controls all resources of the country
► The Government looks after all citizens, by providing education, health care, housing for
free or at a very low cost.
► Prices are set by the government
► However, if the government makes mistakes with trying to determine how much food,
shelter and medicine each citizen needs, they will run out of these things and people could
starve, have no homes or die because they cannot get enough medication.
CENTRALLY PLANNED / COMMAND /
COLLECTIVIST / SOCIALIST
ECONOMY

► In these types of countries, people are not allowed to own businesses or


buy and sell the things they might wish to.
► Also, they are not allowed to practice any kind of religion.
► This system does not allow people to get very wealthy or anyone to
remain very poor.
FREE MARKET / UNPLANNED / FREE
ENTERPRISE / CAPITALIST
ECONOMY
eg. The United States of America
► In these economies:
► There are mainly privately owned business
► The government only provides defense, security, few public goods (eg. Roads, bridges, street lights etc.)
► There are no pure market economies. Only one country comes close to being a real market economy and
that is the United States of America.
► People are allowed to buy and sell what they want to with very few restrictions from their government.
► So, the price is determined by the people who buy and sell goods and services, what we call demand
and supply.
FREE MARKET / UNPLANNED / FREE
ENTERPRISE / CAPITALIST
ECONOMY
► However, businesses will choose to produce only items which are profitable and so firms do
not produce some things, like, medication, water, electricity and education. These things are
called Public goods (goods that all citizens can benefit from which are produced by the
government without making a profit) for example vaccines and merit goods (goods that are
beneficial to citizens which are produced by either private companies or the government but
a profit is usually made) for example, telephone services.
FREE MARKET / UNPLANNED / FREE
ENTERPRISE / CAPITALIST
ECONOMY
► Instead, businesses might produce alcohol and cigarettes which are called demerit goods
(goods which are not beneficial to citizens).
► Also, prices can be very high for some products.
► This system allows some people to get very wealthy while some remain very poor.
MIXED ECONOMY

eg. Trinidad and Tobago, Barbados, Guyana, Jamaica and all the other countries of the Caribbean
except Cuba.
► These economies are a mixture of Free enterprise and command economies. In these economies:
► There are both government owned and privately owned businesses
► Some governments control services like water, electricity, transportation, communication.
► The government tries to discourage demerit goods and encourage merit goods by charging taxes on
demerit goods, eg the tax on alcohol.
Mixed Economy

► The government allows people to buy and sell many of the things they would like.
► However, the government does not allow certain items to be produced, such as illegal drugs.
► They make laws to prevent people from growing, reaping and selling illegal drugs.
► This system allows some people to get very wealthy while some remain very poor.
What is our Economic System?

Free
Planned/
Mixed Market/Free
Command
Economy Enterprise
Economy
Economy

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