BACC 1 – Lesson 6

Types of Economic System

 Think back
• Name a philosopher and discuss his
contribution
Guess Who

John Maynard Keynes

Guess Who

ADAM SMITH
Guess Who

KARL MARX
Guess Who

JOHN STUART MILL

Warm up!
Warm Up!
 Types of Economic System
To address economic problems, several
economic systems have been created and
applied throughout history, below is the
enumeration of these:

1. Traditional economy
2. Command economy
3. Market Economy
4. Socialism
5. Mixed Economy
 Traditional Economy

-Basically a subsistence economy. A

family produces goods only for its
own consumption. The decision on
what, how, how much, and for whom
to produce are made by the head , in
accordance with traditional means of
production.
 Command Economy

- A type of economy, wherein the manner of

production is dictated by the government.
The government decides on what, how, how
much, and for whom to produce. It is an
economic system characterized by collective
ownership of most resources, and the
existence of central planning agency of the
state. In this system, all productive
enterprises are owned by the people and
administered by the state.
 Market Economy

Market economy or capitalism’s basic

characteristic is that the resources are
privately owned, and that the people
themselves make the decisions. It is an
economic system wherein most economic
decisions and means of production are
made by the private owners.
 Market Economy

Under this economic system, factors of

production are owned and controlled by
individuals, and people are free to produce
goods and services to meet the demand of
consumers, who, in turn, are also free to
choose goods according to their own likes.
 Socialism

Socialism is an economic system wherein key

enterprises are owned by the state. In this
system, private ownership is recognized.
However, the state has control over a large
portion of capital assets, and is generally
responsible for the production and distribution of
important goods. In a socialist economy, the
main emphasis is on equitable distribution of
income and wealth. As such, it is considered as
an economy bordering between capitalism and
communism.
 Mixed Economy
This economy is a mixture of market
system and the command system. The
Philippine economy is described as a
mixed economy since it applies a
mixture of three forms of decision-
making. However, it is more market-
oriented rather than command or
traditional.
 Important Economic Terms

Wealth - refers to anything that has a

functional value (usually in money),
which can be traded for goods and
services. Accordingly, wealth is the
stock of net assets owned by individuals
or households.
Consumption – refers to the direct utilization or
usage of the available goods and services by
the buyer (individual) or the consumer
(household) sector. It is also the satisfaction
obtained by consumers for the use of goods
and services.

Production - defined as the formation or

creation by firms of an output (products or
services). It is basically the process by which
land, labor and capital are combined in order to
produce outputs of goods and services
Exchange - this is the process of trading or
buying and selling of goods and/or services
for money and/or its equivalent. It also
includes the buying or goods and services
either in the form of barter or through
market.

Distribution - The process of allocating or

apportioning scarce resources to be utilized by
the household, the business sector, and the rest
of the world. In specific term, however, it refers
to the process of storing and moving products to
consumers often through intermediaries such as
wholesalers and retailers.
 Assignment

Summarize the video that I am going to

send.

Submit your answer to my telegram

account.