What Choices Do I Have?

Keystone Principle #4 – Economic Systems Influence the Choices

Voluntary National Content Standard


For convenience, we categorize economic systems as traditional, command, or market.  These systems form a continuum, with all societies embracing some elements of each.  It is therefore no surprise that students of all ages experience some facet of each type of system in their daily lives.  While it is very helpful to identify cultures of other eras or other regions that may be closely identified with a particular system (Native American tribes were predominantly traditional; history is laden with examples of strong kings or dictators exemplifying a command economy), it is even more helpful to look for the intersection of this Keystone Economic Principleand an ordinary day in the life of each student.  Such insights will enable them to make that personal connection with the rather abstract idea of economic systems.

  • Traditional. Young children typically look to adults with whom they have frequent interaction to be their role models – parents or other family members, child care providers, teachers, doctors, clergy.  The role modeling holds across a wide spectrum, from manners to interpersonal relationships to hobbies to career aspirations.  Children imitate the world they experience as they look for their place in it.  Put in this context, they have a strong emotional connection to life in a traditional economy.
  • Command. During a child’s early school years they experience structural elements of a command system in their schools and families.  Just as command economies are directed from the top down, so also a child’s individual choices are limited by the parents’ and teachers’ role of guiding and training.  Even when given choices, the range of choice is usually limited by the authority figure.  While the idea of a strong authority can be problematic, it is necessary and beneficial to provide a safe haven for a child not ready to make his or her own choices.  While parents and teachers work hard to enable their children or students to grow into emancipated and responsible individuals, students are quite capable of understanding the push/pull nature of command economies: an undesirable limiting of individual freedom of choice, coupled with the allure of believing someone or something is in place to take care of you and relieve you of responsibility.
  • Market. In the United States, examples of a market economy are abundant – a wide variety of choices in jobs, friends, food, religion, ways to spend your time, ideas, reading materials…the list is long.  In a market economy, almost everyone is both a producer and a consumer.  While students can easily think of ways in which they are consumers, be open to the ways in which they are producers.  By doing chores at home, they are supplying their labor in exchange for some family benefit which accrues to them as well.  If you see your classroom as a community, identify the productive output of each student in it.  If you encourage community service by your students, help them to understand the valuable product of their labor and the psychic benefit they receive for doing so.


I. Understanding

  • An economic system INFLUENCES rather than controls your choices.  It is one of several determinants, but not the only one.
  • An economic system answers the three basic questions of economics.
    • What to produce?
    • How to produce?
    • For whom to produce?
  • The main differences between economic systems lie in the answers to these questions:
    • Who owns the resources?
    • Who incurs the costs of resource utilization?
    • Who receives the benefits from resource utilization?
  • The three economic systems below are purely theoretical.  While an economy may be identified primarily with one of these systems, most systems include some elements of all three and are most properly called mixed economies.
    • Traditional Economies – A system that answers the economic questions by following what has always been done in the past. These economies are usually characterized by subsistence living and limited trade.
    • Command Economies – The answers to the economic questions above are made by a central authority, usually “the state.”
    • Market Economies – Economic questions are answered by buyers and sellers at mutually agreeable terms. Such economies are characterized by the decentralization of decision-making.
  • In any of these economic systems, there is a Circular Flow of economic activity in which we all are producers or consumers at some point. In this model, there are flows of goods and services, taxes, and land, labor, capital, and entrepreneurship between all of the stakeholders in an economy. Click here for a power point presentation that builds a circular flow.

II. Skills

Students will be able to:

  • Define vocabulary.
  • Identify the 3 primary types of economic systems.
  • Identify the differences between economic systems.
  • Identify the directional flow of money in the circular flow.
  • Identify the four productive resources.


I. Concept Vocabulary

  • Consumers – A person who uses goods and services to satisfy personal needs and not for resale or in the production of other goods and services
  • Command Economy – An economic system characterized by the public ownership of productive resources and centralized economic planning
  • Market Economy – An economy that allocates resources through the decentralized decisions of many businesses and households as they interact in markets for goods and services
  • Producer – An individual or business engaged in the process of creating goods and/or services to be offered for sale to consumers
  • Productive Resources – That set of resources utilized in the process of production: land, labor, capital, technology and entrepreneurial abilities
  • Traditional Economy – An economic system characterized by decisions made by previous generations being used as the guiding force in the organization of current economic activities

II. Journals

Initial Prompt (to be done during the introduction of this monthly theme/principle):

Think back over the last week and write down”

  • purchases you (or your family) made of food, clothing, and “entertainment” such as movies and music. Look over what you have written and write about what your list says about the range of choices you have when you are acting as a consumer of goods and services.
  • things that you have done that have provided a good or service to others

General assignment:

Choose from the quotations below and write a journal entry of at least half a page.

  1. Restate the idea in your own words.
  2. Say whether or not you agree with the statement.
  3. Explain why you agree or disagree.
  4. Discuss how you have seen it expressed in your own life

III. Quotations:

  1. “The dynamo of our economic system is self-interest which may range from mere petty greed to admirable types of self-expression.” Felix Frankfurter
  2. “One set of messages of the society we live in is: Consume. Grow. Do what you want. Amuse yourselves. The very working of this economic system, which has bestowed these unprecedented liberties, most cherished in the form of physical mobility and material prosperity, depends on encouraging people to defy limits.” Susan Sontag
  3. “It is unfortunate that there are people who say that capitalism is inherently immoral. I do not view it that way at all. I think that capitalism, more than any other system, gives a person the capability, through economic growth and economic development, to provide more opportunity to people.” Lee R. Raymond
  4. “In every aspect of life, including the economic dimension, we are always challenged to do the right thing. In many cases in the market system, which allows a great deal of latitude for human choice, people can get carried away to excess.” Lee R. Raymond
  5. “Nobody spends somebody else’s money as carefully as he spends his own.  Nobody uses somebody else’s resources as carefully as he uses his own.  So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.”  Milton Friedman
  6. “Let me say again that the relationship is asymmetrical: there’s no democracy without a market economy, but you can have a market economy without democracy.”  Peter L. Berger


Economic Systems (from the Powell Center Lessons)

Bead Game

Ingredients for a Successful Economy (from the Powell Center Lessons)

Students are Producers AND Consumers (from the Powell Center Lessons)

Making Informed Choices for Life (from the Powell Center Lessons)

Price as an Allocator (from the Powell Center Lessons)

From Virtual Economics, v. 3:

  • Choices & Changes: In Life, School, and Work – Grades 7-8 – Teacher’s Resource Manual; Unit 1: Lesson 1 – Exchanging Goods and Services
  • Trading Around the World (MS); Unit 5 – Economic Systems: How Nations Organize Their Economies
  • Master Curriculum Guide: Economics and Entrepreneurship (HS); Lesson 5:  The role of entrepreneurs in our economy (Note: The first half of this lesson–Activities 12 and 13–focuses on economic systems. The second part might be saved for Unit 8 which discusses entrepreneurship more directly.)

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