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Civics- Economic Systems

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Civics- Economic Systems

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830070610
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Civics- Economic Systems

Economic System- A nation’s way of producing and distributing things its people want and need.

Traditional Economy- Economic system in which the decisions of “what, how, and for whom” to produce
are based on traditions or customs. The majority of traditional economies evolved, or progressed
gradually, into ones with well-developed markets. Others with strong political or military leaders became
economies based on rigid controls.

Traditional Economy Advantages- The biggest advantage was less uncertainty about what to do.
Everyone knew what was expected of them as they worked to take care of the community. Another
advantage was that traditional economies used fewer resources than other types of economic systems.

Traditional Economy Disadvantages- The biggest disadvantage was that they tended to discourage new
ideas and were slow to adopt better ways of producing goods. Men and women stayed within their own
economic roles.

Command Economy- Economic system in which the government owns and directs the majority of a
country’s land, labor, and capital resources. Individuals and businesses don’t have much say in how the
economy works. Government planners command the actions that produces must follow. Modern
examples of pure command economies are limited to a handful of dictatorships.

Command Economy Advantages- Central planning can provide advantages in rare instances. In times of
emergency, planners can direct resources where they are needed most.

Command Economy Disadvantages- If planners mistake the amounts, people must go without goods and
services. In addition, people do not get rewarded for hard work, so products are often low quality. And
because of the vast number of decisions that central planners must make, command economies tend to
grow slowly and inefficiently.

Socialism- Economy in which government owns some factors of production so it can distribute products
and wages more evenly among its citizens; economic system with some command features. Under
socialism, the government’s goal is to serve the basic needs of all people, not just its leaders. Therefore,
the government directs economic activity to provide transportation, education, jobs, and health care
while allowing for some personal property.

Communism- Theoretical state where all property is publicly owned, and everyone works according to
their abilities and is paid according to their needs.The goal of communism is to build a society run
entirely by workers without any government involvement. Workers themselves would own all the
resources and make all the economic decisions to improve society. Everyone would work to the best of
their abilities and use only the products they need. In this ideal society, no government would be
necessary and could be removed.

Market- Place where a buyer and a seller voluntarily exchange money for a good or service.

Market Economy- Economic system in which individuals and businesses have the freedom to use their
resources in ways they think best. Prices also play an important role in the market economy. Prices are
like signals. If the price of a good or service goes up, it is a signal to produces to make more. At the same
time, it is a signal to buyers to think about buying less. Or, if the price of a good or service goes down,
the opposite happens. It is a signal to produces to produce less, and it is a signal for buyers to buy more.

Market Economy Advantages- Market economies give people a lot of freedom. People are free to own
property, control their own labor, and make their own economic decisions. Another advantage of a
market economy is the competition that occurs. Sellers compete with each other to attract the most
buyers. Buyers compete with each other to find the best prices. Such competition leads to a huge variety
of products and services for customers. If a product can be imagined, it is likely to be produced in hopes
that people will buy it. And because sellers must compete with other sellers, products are made with
quality in mind.

Market Economy Disadvantages- Although market economies enjoy a high degree of success, they
usually do not grow at a steady rate. Instead, they go through periods of growth and decline. Although
the periods of growth are much longer than the periods of decline, people can be hurt in the down
times. Another problem is that businesses, driven by profit, might not give workers good working
conditions or high wages. The profit motive can also result in harmful side effects of business activities,
such as pollution. Finally, a market economy does not provide for everyone. Some people may be too
young, too old, or too sick to earn a living or to care for themselves.

Mixed Market Economy- Economic system in which markets, governments, and tradition each answer
some of the “what, how, and for whom” questions. A reason for mixed market economies is that nations
tend to evolve, shedding some economic features and adding new ones.

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