Objectives: Compare different types of economic systems: traditional, free enterprise/Market command and mixed Assess the performance

of the country s economic system

Economic Systems

Economic Systems
 

Systems of allocating resources Every society-whether it is highly societyindustrialized nation, a communist, socialist, or any form of society-confronts societythree fundamental economic problems. Every society has to determine what commodities are to be produced and in what quantities, how these goods and services can be produced, and for whom these goods and services should be produced.

Factors of Production

Why Economic Systems?



Nations use economic systems to determine how to use their limited resources effectively. Primary goal of an economic system is to provide people with a minimum standard of living, or quality of life. At present, there is no economy today applying a pure economic system Majority, if not all, of these economic systems are present in varying degrees in any economy

Philippines
Best described as a Market system
Contains many command elements- like regulatory agencies and executive orders issued by the President Traditional system-like in the way many young people choose their parent s occupation

Traditional

Found in rural, underdeveloped countries

Customs govern the economic decisions that are made

Farming, hunting and gathering are done the same way as the
generation

Economic activities are centered around the family or ethnic unit

Men and women are given different economic roles and tasks

before

Production is carried on through methods used by their forefathers and are therefore very primitive

Communal land ownership

The leader decides on the management of agricultural production which is the basis of the economy The production, distribution, and use of economic resources are based on traditional practices The technologies are not welcomed since they are in contrast with the traditional practices of their ancestors The economy is only its third priority while culture and religion are its foremost priorities

Traditional Economy


Advantages: Advantages: people have specific roles; security in the way things are done Disadvantages: Disadvantages: Technology is not used; difficult to improve

Market/Capitalism


An economic system in which the means of production and distribution are mostly privately owned and operated for private profit. The possession of private capital and its resulting power.

Market Economy (Free Enterprise)



Also called a Free Market Economy or Free Enterprise Economy Businesses and consumers decide what they will produce and purchase and in what quantities Decisions are made according to law of supply & demand

Supply and demand of goods and services determine what is produced and the price that will be charged.

Characteristics  Needs great amount of profit  Privately owned  Power is only limited to those who are wealthy  Not all people will benefit from this system

Advantages


Disadvantages
   

 

Has a high quality of products Owner gains control of profit Owners gain control of power Efficiency competition to have the best products and services

Inequality Unemployment Not all people will benefit Huge rift between wealthy and poor

Examples:
Country of Capitalism  USA  Hong Kong  South Korea  Japan

Market Economy
The price system in a market The private structure sector owns applies to and determine manages the how much means of will be paid production for a certain commodity or service There is minimum government interference on decisions pertaining to the management of the economy

Existence of competition often results to monopoly

There is presence of economic power

Command Economy
Resource allocation is done by government

Presence of central planning of all economic activities There is no free competition Only the government plays the role in setting legal framework for economic life production and distribution of goods and services The products or needs of the people are distributed based on priorities set by the committee

Command Economy
 

BriefBrief-Description -An economic system in which economic decisions are made by centralized planners, who determine what sorts of goods and services to produce, and how they are to be priced and allocated. Since most known command economies rely on plans implemented by the way of command, they have become widely known as planned economies.

Examples of command economies are: the USSR, North Korea, Albania and Nazi Germany.

Command Economy
Characteristics 1. The resources are owned by the state. 2. The state is responsible in the control and distribution of resources. 3. There is only one responsible on deciding about the process of production. 4. The government has a full involvement in the production of materials


Advantages/pros
 

1) Strong Control of the economy -It means that the government is in control of the countries economy 2) The best interest of society are of principle importance -The first priority of the government is the basic needs of the people

3) Availability of resources -There is no inequality because the resources are equally distributed 4) More government services -More government services because the government is in control of the country

Disadvantages/Cons
1) Centralized Government -There is only one who has the power. People are like puppets because they only do what the government tells them to do. There s no sharing of authorization.

2) Prices and choices of production are arbitrary -These prices and choices of production depends on what the government wanted. It is controlled only by them.

3) Shortages -Since there are only limited products or items, shortages come forth. The products are not enough for the needs pf the people.

4) Low standard of living -Since there is equality, people are not rich or poor. Which means people doesn t have luxuries because they only have basic needs.

Mixed Economy


Combination of a market and a command economy Government takes of people s needs Marketplace takes care of people s wants.

Most nations have a mixed economy: United States, England, Australia Advantage balance of needs and wants met by government and in marketplace Disadvantage citizens have to pay taxes

there a way to assess the performance of an economic system?  What is the BEST economic system?
 Is

Evaluation of Economic Outcomes


1.

Performance Criteria
Economic Growth refers to increases the volume of output that an economy generates over time or to increases in output per capita. Efficiency is the effectiveness with which a system utilizes its available resources (including knowledge) at a particular time (static efficiency) or through time (dynamic efficiency) (dynamic efficiency). efficiency).

2.

3.Income Distribution (Fairness) how fairly an economic system distributes income among households. 4.Stability it is the absence of significant fluctuation in growth rates. The maintenance of acceptable rates of unemployment. 5.Viability of Economic System the ultimate test of an economic system is the longlong-term viability (feasibility or practicability)