Economic systems are the way society structures itself to attempt to satisfy its unlimited needs & wants with scarce resources.
Types of Economic Systems:
In a traditional economy, resources are allocated based on historical precedent. In some cultures, for example, most material possessions are passed on to the first born male child. Or a tribal society may decide that males will receive 10 acres of land on their 21st birthday, yet females will receive nothing.
In an authoritative economy, one person or a small group of people make decisions for society as a whole. In Cuba, for example, Fidel Castro and his aids have a tremendous amount of influence on how their country's resources are used.
In a market economy, however, market forces are allowed to determine how resources are used and what goods & services are produced.
In the real world, economic systems usually have elements of all three of these theoretical systems.
The United States' economic system is predominantly a market economy. Yet, it also has examples of tradition and
authoritative economies. (Do you know anyone who chose an occupation because that is what his or her parents did?
Don't we allow government leaders to spend our tax dollars on the military, police & fire protection, and construction
of roads & bridges?)
Market economies are desirable because they are generally considered to be efficient at allocating resources.
We will analyze market economies using a simple model of supply and demand. This will illustrate how markets are efficient.
We will also discuss what to do when we (as a society) do not like the outcome of allowing markets to allocate
E-mail Dr. Buck with your questions or comments.
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