“If you really want to escape the things

that harass you, what you’re needing is

not to be in a different place but to be a
different person.”
--Seneca
ECONOMICS
SYSTEMS OF ALLOCATION
Systems of Allocation

Scarcity is a fact of life. Because of

scarcity, economic problems arises. Thus
the need to allocate
Three Fundamental Economic Questions

What to produce?
How to produce?
For whom to produce?
Prototypes of Economic Systems

The three prototypes of economic systems

are traditional, command, and market. They
differ in aspects like ownership of resources,
decision-making, means of production and
distribution, incentive system, price
mechanism, and economic priorities.
Traditional System

An economy run by tradition is the oldest

type of economic system. A traditional
society conducts economic activities
according to practices handed down from
past generations.
Command System

A society that operates like an army has a

command system economy. A powerful
authority manages the economy from top
to bottom. A central planning board
makes all the economic decisions.
Market System

Market is not only a place for trading but also

a mechanism through which economic
activities are organized. It provides
information that influences economic
decisions concerning production and
distribution of goods and services.
Traditional System
Advantages
Self sufficient, simple lifestyle, stress-free decision
making
Disadvantages
Resistant to change/closed to innovation, stagnant ang
boring
Command System
Advantages
Fast and drastic decision making, equal contribution of
economic wealth, equality among people
Disadvantages
Absence of private initiative to pursue innovations, no
freedom of enterprise and no freedom of choice,
limited choices of product to buy
Market System
Advantages
Freedom of enterprise and choice , greater drive for
innovation , more products to choose from, quality products
at affordable price
Disadvantages
Unequal distribution of economic wealth, lack, if not complete
absence, of accountability for negative externalities, possible
abuse of freedom
Recitation
1. Discuss the advantages and disadvantages of
command, market, and traditional economic
systems.
2. Do you think there is a single ideal economic system
in the world? why?
3. How do you think is the world economy today, if
most countries have a command economy?