Social Studies - 2019-20

CE.11b - Types of Economies

The student will apply social science skills to understand how economic decisions are made in the marketplace by

b) comparing and contrasting how traditional, free market, command, and mixed economies decide how to allocate their limited resources.

Adopted: 2015



Every country must develop an economic system to determine how to use its limited productive resources.

The key factor in determining the type of economy a country has is the extent of government involvement.

The greater the amount of decision making that is left to the individual, the closer a system is to a free market system.

The greater the amount of decision making that is left to a centralized authority, the closer the system is to a command system.


The basic questions of economics

 What will be produced?

 How will it be produced?

 For whom will it be produced?

 Each type of economy answers the basic questions differently.

Traditional economy

 Economic decisions are based on custom and historical precedent.

 People often perform the same type of work as their parents and grandparents, regardless of ability or potential.

Free market economy

 Private ownership of property/resources

 Profit motive

 Competition

 Consumer sovereignty

 Individual choice

 Minimal government involvement in the economy

Command economy

 Central ownership (usually by government) of property/resources

 Centrally planned economy

 Lack of consumer choice

Mixed economy

 Individuals and businesses are owners and decision makers for the private sector.

 The government is owner and decision maker for the public sector.

 The government’s role is greater than in a free market economy and less than in a command economy.

 Most economies today, including the United States economy, are mixed economies.


Updated: May 16, 2018