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Lesson 3

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52 views25 pages

Lesson 3

Uploaded by

zeezien9
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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THE ECONOMIC

SYSTEM
LESSON 3
THE ECONOMIC SYSTEM
Refers to a set of economic
institution that dominate a
given economy with the
main objective of solving
the basic economics
problems, have significant
roles in answering the three
kinds of economic
questions.
Categories of Economic Systems

TRADITIONAL ECONOMY -
one whose economic
decisions are made with
great influence from
past.
Essential Characteristics of a Traditional Economy

1.Communal Land Ownership


2. Leader decides on the
Management of agricultural
production which is the basis of
the economy.
3. The Production, Distribution,
and Consumption are based on
the traditional practices.
Essential Characteristics of a Traditional Economy

4. New technologies are not


welcome.
5. Economy is only its third
priority, while culture and
religion are its foremost
priority.
6. Mines are used to gather raw
material for production.
Categories of Economic Systems

MARKET ECONOMY

- An economic system where


an individual consumers and
businesses interact to solve
the three basic economic
problems.
Essential Characteristics of Market Economy
1. The private sector owns and
manages the means of
production.
2. Price system in a market
structure applies to determine
how much will be paid for a
certain commodities or service.
Essential Characteristics of Market Economy

3. It is also known as the


laissez faire or free enterprise.
4.There is a minimum
government interference on
decision.
5. It is the presence of
economic power.
Categories of Economic Systems

COMMAND ECONOMY

- An economic system which


the means of production are
publicly owned and economic
activity is controlled by the
government.
Essential Characteristics of Command Economy

1. Government control
of wages and pricing
2. Limited properties
and rights
Essential Characteristics of Command Economy

3. Government
ownership of key
business
4. Robust black
markets
Categories of Economic Systems
MIXED ECONOMY

- A combined elements of
traditional, command and
free market, that both
private and public institution
exercise economic control.
Essential Characteristics of Mixed Economy

1. The means of
production are owned
and controlled by the
private sector by the
private sector as well
as the government
Essential Characteristics of Mixed Economy

2. The people decide on


the economic activities
within the economy.
3. The combination of the
best features of capitalist
and command are
observable in the market.
Essential Characteristics of Mixed Economy

4. Problem of distribution of
goods and services and
allocation of economic
resources are determined
through a combination of the
market system and
governmental laws and
policies.
THE ECONOMIC SYSTEM
THE CIRCULAR FLOW OF ECONOMY
1. How do Economy perform?
2.What are the components
and how they flow to make up
a dynamic economy?
3. How the three basic
economic problems interact
and how the people’s need are
provided.
ECONOMIC PROCESS

- It is the transformation
of economic resources
into finished goods and
services.
ECONOMIC PROCESS
THE LAW OF SCARCITY

Every society faces the


undeniable truth that resources
are scarce relative to human
wants.
The Law of Scarcity states that
goods are scarce because there
are not enough resources to
produce all the goods that the
people want to consume.
Production Possibilities Frontier

A combination of two
goods that can be
efficiently produced by
using all the resources.
It illustrates three
concepts;
SCARCITY – indicated
by the unattainable
combination above
the boundary.
CHOICE – can be seen
need to choose
among alternative
attainable points.
OPPORTUNITY COST – refers to
the cost of using them in their
best alternative choice.

Due to the opportunity, Trade


off arises.
TRADE – OFF - Is a
situation in which more
of one good thing can be
obtained only by giving
up another thing.

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