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Answering The Three

Economic Questions

Objectives
Identify the three economic questions.
Understand how countries answer the
three economic questions.
Identify the societal values that influence
traditional, command, market, and mixed
economic systems.

Three Economic Questions


What goods and services should be produced?
How should these goods and services be produced?
Who consumes these goods and services?
- How would you answer these questions if you had
to answer for America? What goods and services
should America produce? How should the goods be
produced? And, who gets to consume these goods?
With a neighbor take a couple minutes to come up
with an answer.

Answering The Three Economic


Questions
Economic Goals and Societal Values: It is the
societal values that determine how a country
answers the three economic questions. Based
on the level of importance placed on the
various economic goals will determine how a
country answers the three economic questions.
There are many economic goals a society
can have. For example, a society can have an
economic goal of Efficiency, Freedom,
Security and Predictability, Equity, Growth
and Innovation, Environmental Protection,
and Universal Medical Care; just to list a few.

Economies and Values


Economic Systems: The method used by
a society to produce and distribute goods
and services.
- Traditional Economies
- Market Economies
- Command Economies
- Mixed Economies

Traditional Economies
These rely on habit, custom, or ritual to
decide what to produce, how to produce
it, and to whom to distribute it.
Revolves around the family.
Boys follow their father; girls follow their
mother
Communities that tend to stay small and
close
Agricultural and hunting
Resist change, slow to adopt new

Market Economies
Economic decisions are made by
individuals and are based on exchange,
or trade.
Also called free market or capitalism
Based on voluntary exchange
Individuals and private businesses own
the factors of production

Command Economies
The central government alone decides
how to answer all three key economic
questions.
The government owns both land and
capital
The government decides what to produce
and how much

Mixed Economies
Market-based economic systems in which
government play a limited role.
A balance between control and freedom