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Economic Systems Characteristics of a Traditional Economic System Simple Economic Activity: Characteristics of a Command (Communist) Economic System Government

Ownership of Economic Resources: Traditional Economies are based on In a command economy the simple economic activities such as government or some other central farming or hunting and gathering. authority owns most economic resources, such as factories and farms. Reliance on custom and Government control of economic Tradition: resources: Traditional economies are based on In a command economy the customs passed down from government decides how goods and generation to generation. These services are produced and economies undergo very little distributed. For example, the change over time. government decides how many units of a certain product should be made. Technology: No profit motive and no business Traditional economies rely on competition: simple technology such as the In a command economy businesses horse and plow. Few technological are not run for the purpose of changes occur in traditional making a profit. As a result, there economies over time. is little or no competition between businesses. Family labor and gender roles: Traditional economies often rely on the labor of the entire family. Men and women usually have distinct economic roles. Reduced individual economic freedom: Individuals in a command system have little economic freedom because the government controls the economy. For example, people who sell goods do not have the freedom to set prices. Examples: Historical examples of countries with command economies include the Soviet Union and Soviet-bloc countries during the Cold War. Today command economies are less common than market economies. Present-day examples include Cuba and North Korea. Characteristics of a Market (Capitalist) Economic System Individual ownership of economic resources: In a market economy individuals or corporations – not the government – own most economic resources, such as factories and farms. Individual control of economic resources: In a market economy individuals decide how goods and services are produced and distributed. Usually these decisions are made in an attempt to maximize profits. Profit motive and business competition: In a market economy businesses are run for the purpose of making a profit. As a result, they compete with one another to supply the goods and services that consumers demand. Significant individual economic freedom: Individuals in a market system have significant economic freedom because they make their own economic decisions. For example, they can decide where to work and what goods and services to buy. Examples: Today most developed countries, such as the United States and Japan, have market-based economies.

Location: Less common today, but still found in parts of: Africa, Asia, and South America