How do we provide the wants
and needs of society?
An organized way of providing for
the wants and needs of their people
We have 3 basic ways to answer this
• Traditional Economies
• Command Economies
• Market Economies
Why do we leave tips at a
Why do we eat Thanksgiving dinner?
Why do we shake hands with
Why does the bride toss the bouquet
at a wedding?
TRADITION, roles and economic
decisions are defined by custom.
• Set economic roles • Discourages new
for all members of ideas
the community • Stagnation and lack
• Stable, predictable, of progress
and continuous life
How would your life be different if you had
grown up in a traditional economy?
An economy in which a central
authority makes most of the
• These are found today in………….
Peoples Republic of China
Former Soviet Union
• Capable of dramatic • Does not meet
change in a short wants and needs of
• Health and public • Lacks effective
services available at incentives for work
little or no costs • Requires large
• Equality bureacracy
• New and different
In what ways are traditional and
command economies alike?
In what ways are they different?
People and firms act in their own
best interest to answer the basic
• People’s decisions act as “dollar votes”.
• Consumers answer the what
Ex. US, Canada, Japan, South Korea,
Singapore, and parts of Western Europe.
• Can adjust to • Rewards only
change gradually productive
• Individual freedom resources
• Notable lack of • Must guard against
gov’t interference market failures
• Variety of goods
and services =
In the early 1990s many Eastern
European nations moved from a
Command Economy to a Market
Economy. What problems do you
think they faced during the
How are the WHAT, HOW, and FOR
WHOM answered in the 3 economic