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Our World's Economic Systems
Transcript of Our World's Economic Systems
Our World's Economic Systems
Each economic system (traditional, command, market & mixed) has a different approach to trying to find the answers to these questions:
What should we produce?
How should we produce it?
How much should we produce?
Who should we produce for?
Who should we employ?
A traditional economy shows little change from earlier times. Roles in a traditional economy are based on inheritance. They exchange goods with simple trade and barter. These economies are mostly rooted in agriculture.
Since very little money is used there is very little debt within the economy.
These economies show little economic growth.
In command economy the government decides what they produce, how much they produce, how they produce it and who you produce for. Roles are decided by the government . The government
If the government gets the estimate right and the goods are divided equally everybody had the same amout of wealth.
If the government gets the estimate wrong there is a shortage or a surplus. There is also little input from consumers so nobody comes up with ways to improve the economic system from a consumers point of view.
estimates the amount of goods needed and then figures out what materials are needed to reach that estimate.
In a market economy there is little input from the government. The producers decide who they will employ, what they will produce, but supply and demand is how they decide how much product they will sell.
Supply & Demand
The amount of product available.
The amount of product that is wanted.
Market economy is the best for economic growth because everyone has the incentive to earn money because the government does not divide the income.
There is less supplies for services like health and education.
A mixed economy is a combination of a command economy and a market economy. This economy is just like a market economy except the government steps in when needed.
The mixed economy has the advantages of both the command economy and the market economy.
The government does not set the price so it can cause shortages in goods.
Each country has different thoughts on how their economy should run. But they all need each other to help the whole World's economy work. As dependencies throughout all of the countries have progressed the World's economy has become more complex .
A market economy is based on supply and demand.
Demand goes down when less people want your product so supply raises. To get rid of your product you drop the price. So you can sell more at a low price and still make money. When it's gone you can sell a new product that people will pay more for so you can make more money.
Demand rises when more people want your product so supply falls. Because lots of people want your product, and there isn't a lot of it, people will pay more for it.
by Kate Fleming