Production, Distribution, and Consumption

Introduction

Three Basic Economic Questions

For each region that we study, we will look at a country's production, distribution, and consumption of goods and services. We

will study the economy of a region by examining the resources that are produced and distributed. We will ask the three general economic questions that all economists use when they study economic systems. These questions are:

What goods and services does a country produce? How does a country produce them? For whom does a country produce them?

Types of Economic Systems

The four different types of economic systems that are found throughout the world include: traditional economy, command economy, mixed economy, and market economy.

command economy -The central government authority that continuously makes and plans the decisions of a country's production, distribution, and investments.
mixed economy -This economic system has traits of both a market economy and command economy. The state and private sector determine the production, distribution, and investments of a country.
traditional economy- Primitive or undeveloped economies. Generally rely on subsistence agriculture.
market economy -An economy based in which decisions about a country's production, distribution, and investments are made by supply and demand.

Geographers look at the economy of a country in many different ways. They determine if a country is developed or underdeveloped based on the amount of service industries available to the people. Examples of service industries include banking, manufacturing, and healthcare. Countries that offer large service industries are considered developed. Examples of these countries include the United States, England, France, and Australia. Countries that rely heavily on agriculture are considered developing countries. Examples of these countries include Egypt, Guatemala, and Turkey.

Map of developed and developing countries.
Key - Advanced economies in Dark blue. In transition economies in light blue, less developed economies in orange, least developed economies in red.

Trade

Trade is an important part of a country's economy for both developed and developing countries. Many countries have plenty of natural resources while other countries have limited resources. Trade allows countries to sell their resources to other countries. This is call exporting. Trade also allows countries to buy resources and products from other countries. This is called importing.

Exports - items sold to other nations
Imports - items purchased from other nations

Trade can be difficult because some countries place high tariffs, or taxes on goods and products that they import and export. Another barrier to trade are quotas. Quotas are limits on how much of a certain good or product can be imported from another country. These trade restrictions are imposed as a way to increase prices and profits.

Some countries have eliminated tariffs on imported goods and services. This is also known as free trade. For example, in 1994 the North American Free Trade Agreement (NAFTA) was created to allow free trade between Mexico, Canada, and the United States. All three countries agreed to the free trade agreement.

There are many countries throughout the world that rely heavily on the resources, goods, and products of other countries. The economies of these countries become interdependent, meaning that one country must rely on the other. If one country experiences a hardship such as a severe drought or war, it can cause the prices of the other country to increase because of shortages.

Review

Review your terms for this lesson by completing the activity below.

Image of an Arrow

Think About This

By now you have learned about the types of economic systems that you will explore in relation to the societies you will study in this course. It is important to remember that each group of people determines the best type of economic system for themselves. There are positive and negative aspects of each system of course.

MAP OF DEVELOPED AND DEVELOPING COUNTRIES:BY SBW01F [CC-BY-3.0] VIA WIKIMEDIA COMMONS

ALL OTHER IMAGES CREATED BY GAVS