Economic Systems: Vocabulary Flashcards

A set of vocabulary flashcards covering the major economic systems (traditional, free market, command, mixed), their advantages/disadvantages, examples, and the core questions economies must answer.

Traditional Economy

An economy based on customs and habits where decisions are guided by tradition; pride in ancestors; less stress, limited innovation, no profit motive.

Free Market Economy

An economy where decisions about production and distribution are driven by individual choice and competition with minimal government involvement; profits motivate production.

Command Economy

An economy in which the government plans and directs what, how, and for whom to produce; jobs may be provided; limited economic freedom; needs are often prioritized over wants.

Mixed Economy

An economy that blends market freedoms with government regulation and safety nets to balance efficiency with social protection.

Traditional Economy Examples

Examples include the Amish and Native American Tribes.

Free Market Economy Examples

Examples include Colonial America (small towns) with little government intervention.

Command Economy Examples

Examples include China, North Korea, and the Soviet Union.

Mixed Economy Examples

Example includes the United States (USA) with both economic freedoms and government regulation/safety nets.

Three Economic Questions

The three questions every economy must answer: 1) What to produce? 2) How to produce? 3) For whom to produce?

Advantages of Traditional Economy

Less stress, decisions fixed, no competition, pride in tradition, routine living.

Disadvantages of Traditional Economy

Lack of incentive to improve, no profit motive, resistance to modernization, limited job variety.

Advantages of Free Market Economy

No government intervention, individual choice, competition improves products and lowers prices, more options.

Disadvantages of Free Market Economy

No public goods or safety nets, greater wealth gap, monopolies can form.

Advantages of Command Economy

A job is provided for you, needs are usually met, potential to reduce poverty, centralized planning.

Disadvantages of Command Economy

No economic freedom, little incentive to work harder, uniform pay can reduce productivity, limited consumer choice.

Advantages of Mixed Economy

Economic freedom with market competition plus government regulation and safety nets.

Disadvantages of Mixed Economy

Can be very stressful; potential for excessive government involvement and high taxes; gaps between rich and poor.

Base Values of Economic Systems

Market: freedom, self-gain, competition, profit. Command: government control. Traditional: tradition, custom, pride.