THE THREE ECONOMIC SYSTEMS
9TH GRADE PROFICIENCY-REVIEW
One of the objectives of the 9th grade proficiency test requires students to distinguish
between the three economic systems. Most students have been taught that the three
economic systems are: CAPITALISM , SOCIALISM, and COMMUNISM. The above
terms are social political constraints and are NOT the correct names for the major economic
systems of the world.
WHAT IS THE MEANING OF THE TERM ECONOMIC SYSTEM?
It is the way in which a country manages the production and distribution of goods and services.
All economic systems must answer the same basic economic questions of :
WHAT TO MAKE?
HOW TO MAKE IT?
WHO GETS IT?
WHAT ARE THE THREE MAJOR ECONOMIC SYSTEMS?
1.TRADITIONAL ECONOMIC SYSTEM- What is produced and what each person does is
determined by birth. A person might be expected to do what his father did. The share of wealth
is determined by custom or one's position in society.
There are traditional economies that exist today in parts of Asia, the Middle East, Africa and Latin America.
Here is a useful link:
The nomadic lifestyle of the Tuareg's
2- COMMAND ECONOMIC SYSTEM- the individual has very little say as to how the basic
economic questions are answered.
What is produced and what each person does might be determined by a small group of individuals.
The product might be the property of the small group in control or shared with others.
The People's Republic of China ,Uganda and the Soviet Union are examples of command economies, although, most of these nations have gradually moved toward a limited market economy.
Here are two related links:
Uganda Privatization Home Page
Sovietski Collection: Distinctive Timepieces, Optics, Gifts and Collectibles from a Bygone Era.
3- MARKET ECONOMIC SYSTEM- What is produced and what each person does is based on
the activity within the market. Buyers and sellers decide for themselves what goods and services will
be produced. Individuals decide for themselves the amswers to the basic economic questions. The United
States is classified as a market economy.
Here are related links:
Now that you know the three major economic systems, REMEMBER that
no system is perfect and no system exist by itself. Most economic systems are classified
according to the way most economic activity is organized.
CHECK YOUR UNDERSTANDING
Write a definition for each of the following economic systems:
TRADITIONAL , COMMAND, MARKET
How does the individual benefit from a market economy?
Why is there little social mobility within a traditional economy?
How might an individual benefit from a command economic system?
What are the basic questions that all economic systems must answer?
Create a chart in which you would compare and contrast the similarities and
differences between a COMMAND and MARKET economy. As you complete your
chart, keep in mind the three basic economic questions that ALL economic systems
WHAT TO MAKE ?
HOW TO MAKE IT ?
WHO GETS IT ?
Other related links to help students research topics regarding the changing economic systems:
NY Times, Washington Post, USA Today