FOUR ECONOMIC SYSTEMS

Traditional Economy: Relies on custom, ritual, and habit when deciding what, how and for whom to produce and
distribute. Structured by families and work is based on gender roles. Here there is no push for education, people arent
secure, no innovations. In a traditional economy, women and MINORITIES dont have many rights because they flow the
old order. Usually nations with these dont strive anywhere. ex. India during caste system and Europe during Middle
Ages.
Traditional economy (a generic term for the oldest and traditional economic systems)
traditional economy, the three questions get answered by referring to tradition -- you make what has always been
made, in the way it has always been made, etc. There aren't really any countries whose whole economies are
traditional. The closest you could get to this would be Afghanistan or Bhutan -- places where there is little connection to
the global economy.
Market Economy: Economic system in which decisions on production and consumption of goods and services are based
on voluntary exchange in markets. Here people can act for themselves because there is very little government
intervention so this results for people to get involved with competition. The markets determine What,How,and Whom,
and the decision-making is dispersed. Free-market=capitalist ex. Industrial Age in U.S.A and Great Britain
Market economy (the basis for several "right-wing" systems, such as capitalism).
n a market economy, consumers decide the answers to the three questions. They do this by their choices of what to
buy. No one tells companies what to make -- they make whatever they think will sell. If they choose wrong, they go out
of business. Most developed economies today are predominantly market economies. The US, Japan and Germany are
all market economies
Command Economy: Economics in which the central government makes all decisions on the production and
consumption of goods and services. The government owns most business and answers the 3 economic decisions.
However government sometimes allows private ownership. ex. North Korea, Cuba, Soviet Union,
Planned economy (the basis for several "left-wing" systems, such as socialism).
In a command economy, the government decides the answers to the three basic questions. It decides what will be
made, how they will be made, and who will get them. Recently, pure command economies have usually been
communist countries. Good examples today would be North Korea and China.
Mixed Economy: Economic system that combines the free-market with limited government involvement. This is a
combination of free market and traditional. Most modern-day economies resemble this.
Mixed economy (arguably the "centrist" economic system).
A mixed economic system combines elements of the market and command economy. Many economic decisions are
made in the market by individuals. But the government also plays a role in the allocation and distribution of resources.
LAW OF SCARCITY
In economics, scarcity refers to limitations--limited goods or services, limited time, or limited abilities to achieve the
desired ends.
That you can't have everything you want the moment you want it is a fact of life. Figuring out how individuals, families,
communities, and countries might best handle this to their benefit is fundamental to what economics is about. You are
probably used to thinking of natural resources such as titanium, oil, coal, gold, and diamonds as scarce. In fact, they are
sometimes called "scarce resources" just to re-emphasize their limited availability. Everyone agrees natural resources
are scarce because they take a lot of effort, money, time, or other resources to get, or because there seems to be a
finite amount available.
Where resources are finite, or require active distribution, they can become unavailable in the quantities needed or
desired, at least in some locations.
Scarcity (a lack of sufficient supply) can strongly influence changes in an economy, especially scarcity of vital resources
such as food, clothing, and housing. Scarcity can be eliminated through technology. All matter in the universe came from
somewhere. What may be considered scarce or in limited supply such as raw materials is only a reality because of our
lack of discovery or ingenuity. Our current dilemma of scarcity as perceived in an economic paradigm is simply a natural
flaw of that paradigm. Therefore, scarcity is truly a matter of perception
Scarcity is the fundamental economic problem of having seemingly unlimited human wants in a world of limited
resources. It states that society has insufficient productive resources to fulfill all human wants and needs. A common
misconception on scarcity is that an item has to be important for it to be scarce. However, this is not true, for something
to be scarce, it has to be hard to obtain, hard to create, or both. Simply put, the production cost of something
determines if it is scarce or not. For example, although air is more important to us than diamonds, it is cheaper simply
because the production cost of air is zero. Diamonds on the other hand have a high production cost. They have to be
found and processed, both which require a lot of money. Additionally, scarcity implies that not all of society's goals can
be pursued at the same time; trade-offs are made of one good against others. In an influential 1932 essay, Lionel
Robbins defined economics as "the science which studies human behavior as a relationship between ends and scarce
means which have alternative uses."[1] In biology, scarcity can refer to the uncommonness or rarity of certain species.
Such species are often protected by local, national or international law in order to prevent extinction.
PPF (production possibility frontier)
A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.).
The PPF assumes that all inputs are used efficiently.
As indicated on the chart above, points A, B and C represent the points at which production of
Good A and Good B is most efficient. Point X demonstrates the point at which resources are not
being used efficiently in the production of both goods; point Y demonstrates an output that is
not attainable with the given inputs.
In economics, a productionpossibility frontier (PPF), sometimes called a productionpossibility curve, production-
possibility boundary or product transformation curve, is a graph representing production tradeoffs of an economy given
fixed resources. The graph shows the various combinations of amounts of two commodities that an economy can
produce (e.g., number of guns vs kilos of butter) using a fixed amount of each of the factors of production. Graphically
bounding the production set for fixed input quantities, the PPF curve shows the maximum possible production level of
one commodity for any given production level of the other, given the existing state of technology. By doing so, it defines
productive efficiency in the context of that production set: a point on the frontier indicates efficient use of the available
inputs, while a point beneath the curve indicates inefficiency. A period of time is specified as well as the production
technologies and amounts of inputs available. The commodities compared can either be goods or services.
CIRCULATION FLOW
A simple economic model illustrating the flow of goods and services though the economy. In the model, producers are
termed as "firms" while consumers are referred to as "households." Firms supply goods and services while households
consume these goods and services. Factors of production (land, labor, capital) are supplied by the household to firms
and the firms convert these into finished products for household consumption.
One of the main basic economic models is the circular-flow model, which describes the flow of money and products
throughout the economy in a very simplified way. The model represents all of the actors in an economy as either
households or firms (companies), and it divides markets into two categories: markets for goods and services: markets for
factors of production (factor markets) .(Remember, a market is just a place where buyers and sellers come together to
generate economic activity.)
In economics, the terms circular flow of income or circular flow refer to a simple economic model which describes the
reciprocal circulation of income between producers and consumers.[1][2] In the circular flow model, the inter-
dependent entities of producer and consumer are referred to as "firms" and "households" respectively and provide each
other with factors in order to facilitate the flow of income.[1] Firms provide consumers with goods and services in
exchange for consumer expenditure and "factors of production" from households. More complete and realistic circular
flow models are more complex. They would explicitly include the roles of government and financial markets, along with
imports and exports.