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Chapter 2

ECON 101 Chapter Notes - Chapter 2: Mbuti People, Patient Protection And Affordable Care Act, Economic System


Department
Economics
Course Code
ECON 101
Professor
Sahar Hassanin
Chapter
2

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Fields 1
Chapter 2: Section 1 Notes
Economic Systems
Economic systems
o All societies use this to provide for needs and wants of their people
o Three main economic systems exist:
1. Traditional
2. Command
3. Market
No real and true market economies in the world
o Most economies combine elements of the three
Traditional Economies: use ritual, , or customs to answer three basic questions of WHAT,
HOW, and FOR WHOM to produce
o Traditional economy: use of scarce resources and economic activity is based on
habit or custom
o Advantages
1. Everyone knows which role to play
Generations of jobs
2. Little uncertainty on what to produce or how to produce it
3. Custom or traditions determine who is provided for
Ex. Young take care of elderly
Family of five kids gets more supplies than a family of three
(because of necessity)
o Everyone shares
o Disadvantages
1. Individuals generally not free to make decisions
2. New ideas discourages, leading to stagnation and a lower standard of
living
3. Strict rules defined by elders and ancestors
o Examples:
1. Inuit
2. Australian Aborigines
3. Botswana
4. Mbuti
5. Indigenous groups: Native Americans (in the past)
Command Economy: rely on a central authority to make most of the economic decisions
o Command economy: a central authority makes the major decisions
1. Central authority = the government
o Advantages
1. Can change direction drastically through emphasizing/allocation
Ex. Soviet Union changed overnight (making waffle irons to
making bullets)
Instantly from peace to war
U.S. example: mobilization
2. Health and public services available to everyone at little or no cost
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