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Economic Systems by Mind Map: Economic Systems

1. Market Economic System

1.1. Economic decisions are made by individuals competing to earn profits based on supply and demand

1.2. Resources are owned by individuals

1.3. Profit, not quotas, is the motive for increasing work

1.4. Competition determines price and increases the quality of products

1.5. Individual freedom is considered very important; individuals have freedom to make economic decisions

1.6. Also called “capitalist” economy

2. Mixed Economic System

2.1. Combines elements of pure market and command economies; Government and individuals share the economic decision-making process

2.2. Government guides and regulates production of goods and services

2.3. Resources are owned by individuals

2.4. Government serves to protect both producers and consumers from unfair policies and practices

3. Market Advantages

3.1. Prices determine by market forces (supply and demand); competition brings down prices

3.2. Consumers can buy whatever they like in whatever amounts they want

3.3. Adjusts to change easily

3.4. Little government intervention

3.5. Great variety of goods and services

3.6. Capital flows to where it will get the greatest return

4. Market Disadvantages

4.1. Does not always provide basic needs of everyone in society, which can lead people to slip into poverty

4.2. May make it difficult for government to provide adequate social services

4.3. There are occasionally market failures

4.4. People can make choices which are harmful to themselves and to others

5. Mixed Advantages

5.1. Can focuses on social welfare and political freedom, as well as individual liberties

5.2. Has the same advantages of a Command and Market economic systems

6. Mixed Disadvantages

6.1. Government intervention can hinder progress

6.2. May not lead to optimal use of resources

6.3. Has the same disadvantages of a Command and Market economic systems

7. Traditional Advantages

7.1. Little friction among members because there is little competition

7.2. Individual roles are clearly defined

7.3. System is generally wellunderstood by participants

8. Traditional Economic System

8.1. An economic system where tradition and custom govern economic decisions

8.2. Economic activities are usually centered toward the family, tribe, or ethnic group

8.3. Resources are allocated based on inheritance

8.4. Farming, hunting, and gathering are done largely in the same fashion as the generation before

8.5. Choices are determined by environment

8.6. Little or no use of technology

9. Command Economic System

9.1. The government or other central authority makes all economic decisions

9.2. Individuals have little, if any, influence over economic functions

9.3. Resources are owned by the government

9.4. There is no competition; the purpose of business is to provide goods and services, not to make a profit

9.5. Factories are concerned with quotas

9.6. Consumers have few, if any, choices in the marketplace

9.7. The government sets the prices of goods and services

10. Traditional Disadvantages

10.1. Does not allow for growth and development

10.2. Changes are slow

10.3. There is little social mobility (your role is determined by birth)

10.4. Does not take advantage of technology -Individuals often have no con

11. Command Advantages

11.1. Can ensure stability because it does not coincide with business cycles

11.2. Serves people collectively instead of individuals; focus on equality

11.3. of individuals; focus on equality

11.4. Distributes wealth among all of society

11.5. Products produces fulfill needs

12. Command Disadvantages

12.1. Often there is insufficient resource distribution, ie. Shortages and/or surpluses

12.2. Cannot determine societies objectives and consumer preferences as well as market can

12.3. Lack of incentives for innovation

12.4. Infringes on personal freedoms

12.5. Can often lead to corruption among state planners

12.6. Cannot easily adjust to change