LESSON 11 - GEN 005

What is an economic system?

• A system of cultural beliefs and practices within a society

• A system of production, resource allocation, and distribution of goods and services within a society or a given geographic area

• A system of political governance within a society

• A system of military organization within a society

Which of the following are the basic economic questions that a society needs to answer?

• Where to distribute the goods and services

• How to create and in what quantities

• Who receives the production output

• How to produce goods and services, and how much of these goods to make

What are the characteristics of a Traditional Economy?

• Produces a surplus

• Uses money for transactions

• Based on agriculture, hunting, fishing, and gathering

• People live in urban areas

What is a Command Economic System characterized by?

• Market forces controlling the economy

• Government control of pricing and production decisions

• Private ownership of all factors of production

• Social equality based on wealth

What defines a Market Economic System?

• Social equality as the primary incentive

• Government ownership of all means of production

• Centralized planning of pricing

• Laws of supply and demand directing goods and services

What is a Mixed Economic System characterized by?

• No regulation of the private sector

• Complete government control of all economic activities

• Absence of social welfare programs

• Combining private and public enterprises

What are the advantages of a Traditional Economy?

• Isolation of people within the economy

• No industrial pollution and clean living environment

• High level of choices available

• High overall quality of life

What are the disadvantages of a Traditional Economy?

• High overall quality of life

• High level of choices available

• Large outside economies overwhelming the system

• Isolation of people within the economy

What are the advantages of a Command Economic System?

• Social equality based on wealth

• Market forces controlling the economy

• Lack of competition and efficiency

• Low levels of inequality and unemployment

What are the disadvantages of a Command Economic System?

• Social equality based on wealth

• Low levels of inequality and unemployment

• Lack of competition and efficiency

• Market forces controlling the economy