Economic systems
Tradition-based economic system
THE MIXED ECONOMY SYSTEM
CAPITALISM AND THE FREE MARKET SYSTEM
AUTHORITY: THE CENTRAL PLANNING SYSTEM (comunism)
economi in the past
Economy in the present
based on :
customs
laws
beliefs
Feudal Europe
formed guilds
regulated and established rules of production
Tradition economy
economy is constantly changein
due the tecnological inovations
preserving the economy
production was strictly defined by rules
the products obtained for livestock
were sold in cities
only some grups:
economic activities are still based on tradition
Arctic Circle, the Amazon, Africa, Southeast Asia and Oceania
very limited economic growth
self-consumption and subsistence.
Principes of traditional economy
consume the things that they produced
self-sufficiency
purchase very few goods
Capitalism
Is a socioeconomic system:
Investment of capital
economic agents
Private ownership
decided what to produced
throught the free Market
the people how they have:
they own goods(car, hause...)
they own money
on the economy
to maximise they profits
Free market:
Supply: the products for a specific price.
Demand:
Price: the value assigned
The perople how want to buy a product
Price decreasd:
Price increased:
If the supply is high but the demand is low
If the demand is high but the supply is low
Competition among economic agents
Producing a product
Paying
Lowest possible price
lowest possible cost
This is the teory
but the supply side desires the greatest profit.
this create inecualities
free market system,
the interaction between supply and demand
determines the decision on what to produce.
generally represented by the state
China and Russia were the most important
the objective
is get a soccial equality
prevent injusticies
the state determine which goods or services:
how to produce
who to produce them for
they should produce,
very complicated bureaucracy.
Today, only North Korea continues to follow
China, Vietnam, Laos, Cuba and Belarus have implemented reforms
how?
the objetive
Countries with a mixed economy include:
Iceland, Sweden, France, the United Kingdom, the United States and Russia
avoid negative effects of the unequal distribution of wealth in a free market
avoid lack of efficiency in authority-based systems
free market deals with basic economic problems
the state acts as an authority to help guarantee equal opportunities.
collects taxes
The taxes money:
in public goods and services
social security benefits and other kinds of support.
