1. Answering the Three Economic Questions

2. Economic System
The method used by a society to produce and distribute goods and services
United States?
Mixed economy, capitalism or free enterprise
Sweden?
Centrally Planned or Socialism
Former Soviet Union?
Centrally Planned or Communism

3. Three Key Economic Questions
What Goods and Services should be produced?
Each society must decide what to produce to satisfy needs/wants because of limited resources
Food and Shelter
National defense and education
Public Health/welfare

4. Three Key Economic Questions
How should these Good and Services be produced?
Each society must decide what and how many resources to use to produce products
Produce electricity through oil, nuclear or solar power.
Large corporate farms or small family farms
Factors of production play an important role

5. Three Key Economic Questions
Who Consumes these Goods and Services?
Each society answers this by choosing how to distribute income.
Compensation of supplying land, labor or capital.
Why do doctors and lawyers get paid more than firefighters or police officers?
Distribution of income is main difference between each economic system.

6. Economic Goals and Societal Values
Efficiency
Making the most of the resources
Best way in least time
Freedom
Free from government intervention
Make your own choices
Security and Predictability
Assurance of goods/services availability
Provide a safety net for disaster relief

7. Economic Goals and Societal Values
Equity
Fair distribution of wealth
What should you be paid for a job?
Growth and Innovation
Leads to increasing wealth and higher standard of living
Must provide new jobs/income for increasing population

8. Traditional Economy Habit, ritual or customs Little innovation
Boys follow father
Girls follow mother
Few safety nets
Resistant to change
Low standard of living

9. Market Economy
Decisions made by individuals and based on exchange or trade
No government intervention
Also called:
Free markets
Pure Capitalism

10. Centrally-Planned Economy
Central government decides how to answer all economic questions.
No free enterprise allowed
Also called:
Command economy

11. Mixed (Modern) Economy
Combination of Traditional, Market and Centrally-Planned economies.
Free Enterprise exists but there is also limited government intervention