We began the unit with a review of the questions of economics. Now it is time to learn about how different types of economic systems answer those questions. The types of economies we will examine are

• traditional

• free market

• command

• mixed

Traditional economic systems have these characteristics:

• Economic decisions are based on custom and historical precedent.

• People often do the same type of work as their parents and grandparents regardless of their abilities or potential.

• These societies are small and usually farm-based.

Free market economies (also called capitalism) have the following characteristics:

• private ownership of property and resources

• profit

• competition

• consumer power

• individual choice

Adam Smith was a Scottish 18th-century philosopher who was a founder of free market capitalism.

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Command economies (communism is an example) have the following characteristics:

• central (government) ownership of property and resources

• centrally (government) planned economy

• lack of consumer choice

Karl Marx was a 19th-century German philosopher who wrote about the way a command economy would operate.

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Mixed economies have the following characteristics:

• Individuals and businesses make decisions for the private sector.

• Government makes decisions for the public sector.

• Government has a larger role than in the free market economy and a lesser role than in the command economy.

Most modern-day economies are mixed economies, including ours here in the US.