Lesson 1.3: Modern Economic Systems

​Central authority (government or small group of people) decides what, how, and for whom stuff is made.

EX: Communism

Command

Individual people (and companies) decide what, how, and for whom stuff is made.

EX: Capitalism

Market

• ​​As a market economy where private individuals or corporations own and control the means of production.

• Contemporary examples: the United States and Western European countries.

• Advantages: can encourage entrepreneurship and innovation, can provide consumers with wide range of choices in goods, may lead to more efficient allocation of resources based on supply and demand

• Disadvantages: can lead to income inequality, may lead to negative externalities like climate change, may lead to instability like recessions

• ​​As a command economy where the state owns and controls the means of production.

• Historical examples: Soviet Union and China during the Cultural Revolution.

• Advantages: can allow for efficient resource allocation, can reduce inequality and provide basic needs for all, and may lead to long term stability

• Disadvantages: may stifle innovation and creativity, may limit consumer’s individual choice, government involvement can lead to bureaucratic inefficiencies

Assignment Due End of Class:

Read and complete the following handout.

You CAN work alone or with a partner of your choice, but no more than 2 people can be working together.

We will have an informal whole class debate on whether which is the better economic system tomorrow. Make sure you grasp the content.