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Four Types of Economic Systems (Mixed (Government (Military, International…
Four Types of Economic Systems
Mixed
Private & Public Business
Free Markets with state intervention
Protect private property
Supply & Demand
Self-Interest of Individuals
Government
Military
International Trade
National Transportation
Plan Guides Key Industry
Owns Key Industry
Pros
Prices are measured by supply and demand
Rewards Most Efficient Producers
Encourages Innovation
Allocates more funding to research than Straight Market
Cons
Too much freedom can leave less competitive members without support
Defense industry could become government subsidized monopoly putting country into debt and neglecting other programs
Not enough regulation can create tax loops and breaks
Examples
Globalized economy
U.S constitution...sort of
Traditional
A traditional economy is focused on distribution, customs, and production based on needs
Pros:
Sustainable
Equal roles
Members tend to get along
Hunter-Gatherer's
Less industrialized
Trade Systems
Family/tribe ruled
No official currency
Cons:
Changes in the market are hard to deal with
Limited ability for population change
Examples:
Most of Haiti
America before 1492
Eastern Russia
Bhunta
Command
In a command economy, the government is in control of the production and distribution of goods.
Pros
Less socioeconomic inequality
Lower unemployment rates
Motivated by common good, rather than profit
Cons
Government control leads to inefficiency
Hard to run effectively
Less competition may prevent innovation
North Korea uses the command system. In this country, there is no free market and the government controls every aspect of the economy
Market
The production of goods in a market system is based on supply and demand. Businesses compete to get the most customers, customers look for the best prices, and employers try to spend the least money on production
Pros
Because of the competition, desired goods are produced more
Leads to innovation
Goods are produced efficiently
Less government control
Cons
Less care for people who are at a competitive disadvantage (disabled people, the elderly, children, the poor)
Hard for smaller groups/companies to get ahead
Leads to large economic/social gaps
Based on the values of those in charge/"the winners"
The U.S. uses a market economy. There are multiple areas in the Constitution where it limits the government's power in the economy, protects innovation, protects private property, and protects the free market.