Compare basic characteristics of market, traditional, command, and mixed economies.
Market economy:
private businesses operate to increase their individual profit, and the prices of goods and services are determined by individual business owners based on supply of resources and consumer demand.
How are free market economies are able to achieve economic growth?
Competition encourages innovation, which causes growth. The innovations resulting from inter-firm competition are a major cause of economic growth in free market economies.
Who owns the factors of production in a market economy?
Households. Unlike command economies, where the state owns the factors of production, they are owned by households in a market economy.
Mixed Economies:
In the world today, many countries are described as having this economic model, which typically include some of the freedoms of a market-based economy and some government regulation of goods and/or services.
Which of the following is considered capital when used to produce goods and services?
Machines are examples of capital.
Example of mixed economy
The United States: individually owned businesses that compete for consumer attention, but the U.S. government also provides and regulates some goods (e.g., highways) and services (e.g., mail delivery, public education).
What payment do producers exchange for the use of labor?
Wages are payment for labor.
Traditional economy
economic decisions are based on established patterns of behavior. Resources are allocated based on custom, and production primarily involves survival needs. Work best in small societies with few resources and unchanging needs. - boys tend to follow the same occupations as their fathers.
Government intervention in a modern economy is useful because:
governments are best able to meet certain needs and wants of modern society. In situations where the market is not responsive to social needs, government can often supply what is desired.
Command economy:
some central authority or government controls production and other economic decisions such as the price of goods, wages for labor, and distribution of wealth.
