Economic Systems

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Economic Systems by Mind Map: Economic Systems

1. Traditional

1.1. This system type is very “traditional” where people live a lot off of agriculture and of the land. These are more rural areas and land owners with farms. Barter is often used instead of money. This type of system operates in evolving countries.

1.1.1. IE: Africa, Asia, Latin America and the Middle East

1.1.1.1. Pros – Keep it simple! These economies are basic at the core. Everyone knows the roll they play and expectations are for the efforts provided. Basic needs are able to be met at a basic cost of living. This can keep the cost of living down and can create a sense of togetherness within the community. Cons – Because a lot of this economy is based off the agriculture, when there is an influx in the weather, this can have a big effect on the production of goods causing shortages. This can also lead to other economies overtaking over these smaller businesses. Additionally, there is not as wide of a variety as there would be in larger economies. This can be a difficult change to those who have lived this way for so long and are by definition, traditional.

2. Command

2.1. This system allows the government to dictate and regulate what products are made, the quantity of said product and how much they will cost instead of the free market. It is self-serving and planned by the government to meet its societal goals.

2.1.1. IE: The former Soviet Union, North Korea and Cuba

2.1.1.1. Pros – Everyone works together; as in companies and resources work with other companies and resources to produce for everyone. It can also provide a common standard of living. If everyone is allowed the same things, there is less of a hierarchy. Cons – Because the government limits the amount of goods and services available to the public, this can quickly create a “black market” for all sorts of things. In turn creating more illegal activities and possibilities for “criminals.” The government will also dictate what job you have and drop you into where they believe you will be the most beneficial to them. It reduces freedoms for people to do and buy what they please.

3. Market

3.1. This system works off of a system to set prices for products based on supply and demand. Small businesses and entrepreneurs can make profits and thrive based on the decisions they make for their company when it comes to labor, inventory and prices rather than by the central government.

3.1.1. IE: United States, United Kingdom, Canada, Germany Mexico

3.1.1.1. Pros – The encouragement and availability of resources allow entrepreneurs and new businesses to create new job opportunities and lower unemployment. It also breeds competition with other companies selling the same or similar products; while at the same time, motivates companies to produce more quality products. Cons – While market systems encourage competition, it can also make it difficult to stay in business, especially when similar products are available. Health insurance and education are provided privately and may be more expensive and cumbersome to obtain.

4. Mixed

4.1. This is a combination of the Command and Market Economic systems. Private businesses and government both have a say in the vesting, buying and selling and exchanging good in the country. There is a regulation of monopolies in the Mixed Economic System.

4.1.1. IE: United States, United Kingdom, Iceland, Sweden, France, Russia, China

4.1.1.1. Pros – Small business owners and entrepreneurs have a say in the inner workings of their businesses and are able to grow and profit from direct decisions. This can be from pricing the products based on supply and demand they sell to offering employment opportunities. Cons – While pricing based on supply and demand can be lucrative for many businesses, if you are a small business competing with large companies with similar products, this can be difficult to compete. Furthermore, Bailouts; this in my opinion is the biggest con of a mixed economy. When the market tanked back in 2007- 2008. Companies like SunTrust who offered loans and funds to people who had no business taking them received tax-payer bailouts.

5. Our economic system as the United States is a Mixed Economic System. This is why we are listed under both the Market and Mixed Systems. We do have the freedom to develop their business and to profit. At the same time, the government can set regulations for cost and production that can quickly deplete resources. It is important to have an economic system to create a balance in society and social prosperity. If there wasn’t a specific economic system put in place, it would be chaos.