Lecture 1 Economic systems - Definition and Types

Economic systems

1. Economic systems
–Definition and Types
February, 2021

2. Scarcity problem
There are limited resources to satisfy
unlimited wants!

3. Scarcity problem
Individuals and Society!

4. Scarcity of factors of production
Land
Labor
Capital
Entrepreneurs
hip

5. Every society –same scarcity
problem!
How to
distribute
limited
resources to
peoplein a fair
and effective

6. Basic economic questions
What to
produce?
How to
produce?
Who gets the
products?

7. Economic system -Definition

8. Economic system -Definition
---is the way a
society organizes
the production,
distribution and
consumption of
goods and services

9. Economic system -Types
B) Command economy
D) Mixed economy
C) Market economy
A) Traditional
economy

10. A) Traditional economy -Definition
Based on customs, tradition, religion, habits –
bartering!

11. A) Traditional economy -Features
Little or no profit / limited technology / rural
areas

12. A) Traditional economy –3
questions
What to produce? –goods for
survivalHow to produce? –farming, hunting, gathering
For whom to produce? -for themselves, for
the family

13. A) Traditional economy –Examples
Parts of Africa, Latin America, Middle East,
Asia, Inuit

14. A) Traditional economy –Examples
Parts of Africa, Latin America, Middle East,
Asia, Inuit

15. A) Traditional economy –Pros &
Cons
Positive sides
Tradition is maintained
Each member of society has a profound role
Predictable job and lifestyle
Negative sides
Vulnerable to changes –cannothandle change very well
Lack of resources and limited production
No technology, low standard of living

16. B) Command economy -Definition
Government makes all the economic decisions!

17. B) Command economy -Features
Centralized power decides about everything!

18. B) Command economy–3 questions
What to produce? –government
decidesHow to produce? –government planning
For whom to produce? –government controls
distribution

19. B) Command economy–Examples
USSR, Cuba, China, Vietnam, North Korea

20. B) Command economy–Examples
USSR, Cuba, China, Vietnam, North Korea

21. B) Command economy–Examples
USSR, Cuba, China, Vietnam, North Korea

22. B) Command economy–Pros & Cons
Positive sides
Noworry for employment, housing, education, healthcare
Regulation (protection of environment, socio-disabled…)
Coordination of scarce resources at time of crisis
Negative sides
Limited innovation by individuals
Consumers have no choice, no freedom
Unfair to population, unrest can happen

23. C) Market economy -Definition
Market economies are hypothetical! Only market
forces!

24. C) Market economy -Features
Free market, no government intervention!

25. C) Market economy–3 questions
What to produce? –consumer
decidesHow to produce? –companies choose
For whom to produce? –based on consumer’ income

26. C) Market economy–Examples
NONE

27. C) Market economy–Pros & Cons
Positive sides
People have more choice, can start business they like
Seemingly perfect
No government involvement, no taxes, no regulation
Negative sides
Not-existent
Zero government involvement
Desire for money can lead to poor quality of goods

28. D) Mixed economy -Definition
Combination of market and command economy!

29. D) Mixed economy -Features
Market forces + Government intervention!

30. D) Mixed economy–3 questions
What to produce? –businesses, consumers /
governmentHow to produce? –government set safety
standards
For whom to produce? –consumers/ social welfare
causes

31. D) Mixed economy–Examples
USA, Canada, England, Mexico, Japan, many
others

32. D) Mixed economy–Examples
USA, Canada, England, Mexico, Japan, many
others

33. D) Mixed economy–Pros & Cons
Positive sides
Allows for freedom
Anyone can be successful
Innovation
Negative sides
Governmentdisputes
Taxes
Inequality in the world, poverty

34. Exercise: Link the letters with
numbers1Inuit, Amish, Bedouin belong
2Government is responsible
3Market forces+ Government
4Bartering
5Examples of market
6Economic system
7Scarcity
8Entrepreneur
9Factorsof production
10Command economy is
aWay of production, distribution
goods and services
bNone
cLand, Laborand Capital
dNot enough resources for
wants
ePerson who organizes, manages
of production
fNational defense, fire-fighting
owned companies
gMixed economy
hTraditional economy
iCentralized power
jTrading without money

35. Exercise: resolved!
1Inuit, Amish, Bedouin belong
2Government is responsible
3Market forces+ Government
4Bartering
5Examples of market
6Economic system
7Scarcity
8Entrepreneur
9Factorsof production
10Command economy is
hTraditional economy
fNational defense, fire-fighting
owned companies
gMixed economy
jTrading without money
bNone
aWay of production, distribution
goods and services
dNot enough resources for
wants
ePerson who organizes, manages
of production
cLand, Laborand Capital
iCentralized power

36. Homework
Choose one economic system (Bedouins, Amish,
Inuit community, USSR, North Korea, USA,
Macedonia) and by using words, pictures and
interesting facts explain it in detail. The essay
needs to be minimum 2 pages!

37. Literature, links and a song
https://www.youtube.com/watch?v=djPFUgUOujY
https://www.youtube.com/watch?v=5Q8WUvWIb8Q
https://www.youtube.com/watch?v=rQz5q42nmL4
https://www.youtube.com/watch?v=sHkviUk_47k
https://www.youtube.com/watch?v=TZGqPtzAH5k
https://www.youtube.com/watch?v=AHJSSr_wrJY
https://www.economicsonline.co.uk/Competitive_mark
ets/Economic_systems.html
https://courses.lumenlearning.com/sociology/chapter/
economic-systems/
https://www.youtube.com/watch?v=Cpqq9HXYJPM