​Let's Review

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Do you remember the three questions that every country must answer when developing its economic plan?

1. What goods/services will be produced?

2. How will goods/services be produced?

3. Who will consume the goods/services?

The way a country answers these questions determines its economic system (Traditional, Command, or Market).

​Traditional

​This system answers the three economic questions based on traditional customs and beliefs of the past. The values and traditions have been passed down from generation to generation.

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The exchange of goods is done through bartering. Bartering = trading without using money. Some small tribes in northern Russia have traditional economies where the people still follow the way of life of their ancestors.

​Command

​This system answers the three economic questions through strict government control. The government regulates all the country’s economic decisions: prices of goods, wages of workers, goods to be made, etc. This system is very harsh to live under; because of this, there are no PURE command countries in the world today. Some countries are close: former Soviet Union, former East Germany, North Korea, Cuba, etc. All these countries have the same type of government: Communist! The government is in control of everything.

​Market

​This system answers the three economic questions based on supply and demand in the marketplace. The goods and services produced are determined by what consumers want to buy and what producers want to sell. The government has no control over the economy; private citizens answer all economic questions.

​Market

​In a truly free market economy, the government would not be involved at all. Scary… There would be no laws to make sure goods/services were safe. *Food! Medicine! There would be no laws to protect workers from unfair bosses. Because of this, there are no PURE market economies, but some countries are closer than others.

​Mixed

​No countries have an economy that is run entirely by government commands or completely by the free marketplace 100% of the time. Since there are really no countries with either a “pure command” or a “pure market” economy, what does that make them? Most democratic countries have some characteristics of both systems, so we keep it simple and call them: MIXED.

​Continuum

​Most countries’ economies are closer to one type of system than another. They fall somewhere on a continuum between a pure market economy on one end and a pure command economy on the other end. Where a country falls on the continuum depends on how much the economy is decided by the marketplace (consumers, supply and demand, businesses) versus the government.

​Time to answer questions. Close your CB.