Economic Systems LESSON 8
Economic Vs. Political Systems
Economic System
• The way a country organizes it resources
and distributes goods and services to its
citizens
• Several aspects are controlled, such as
capital (investments/revenue), land use,
and labour.
• Many organizations, agencies, and
decision-makers are a part of this process.
*Economic and political systems are closely linked*
Political System
• Is the type of government by which a
country is run.
• Examples: In Canada, there are five major
political parties at the federal level:
Liberals, Conservatives, NDP, Green
Party, and Bloc-Quebecois.
• Currently the Liberals are in power.
Three Types of Economic Systems

1. Market Economy - also known as a Capitalist Economy

2. Centrally Planned Economy – also known as a

Socialist Economy
3. Mixed Economy
Economic Systems

 National economic systems are classified based on who can answer these following four
questions:
a) What should be the country produce and in what quantities?

b) How should scarce resources such as labour and capital be allocated?

c) How should goods and services be distributed throughout the country?

d) What should be the price of the goods or services

Is it the government or private individuals/private firms?

 There is not one country in the world that is solely a Market
Economy.

Market An economic system determined by free competition, in which

businesses, consumers, and government act independently of
one another, and market forces and self-interest determine
Economy what goods are created and sold.

In a market economy, the questions on the previous slide are

answered by individuals and businesses.
 The government controls
all elements of the
Centrally economy.
Planned
Market
The government answers
all four questions
 Sits between a market economy and a
centrally planned economy

Mixed Both government intervention and

Economy business enterprises exist

Both government and businesses

answer the four questions.
 Private Corporations and people are
Property encouraged to own property.
Profit Profit belongs to the business
owners and can spend it the
way they want.
In a Market
Competition Companies are in constant
Economy competition and being
innovative is a priority.
 Private Ownership of property is restricted
Property
Profit All profit belongs to the government.
In a Centrally
Planned
Competition Limited, since government
Economy determines the price, quality, style,
and amount of goods or services.
 Private Property is owned by individuals,
corporations, or government
Property
Profit Is encouraged, although taxed by the
government to support government
In a Centrally projects and programs
Planned
Competition Strong amongst corporations and the
Economy government may also be a
competitor.
 Advantages and Disadvantages For Each Type
of Economy
Advantages Disadvantages
Market  Efficient use of resources  Income gaps between the rich and poor
 Good quality products  Frequent outsourcing

Centrally  Minimum standard of living for all citizens  Restricts individual freedoms
Planned  Health, education, & other social programs  Lack of innovation
are free to all citizens  Corruption

Mixed  Individual incentive  High taxes

 Basic social services (i.e. health care)  Government intervention sometimes stands
in the way of a business’ growth