Chapter 2 Economics

Which is more important in a traditional economy, accumulating individual wealth or honoring tradition?

Families, clans, or tribes make economic decisions based on customs and beliefs

command economy

Government makes all the decisions

What drives the choices of consumers and producers in a market economy?

Individual choice, not government directives

Does Adam Smith's "invisible hand" also function in traditional and command economies?

Mainly in market economies

How are economic decisions made in a command economy?

The government decides what goods and services will be produced, how they will be produced, and how they will be distributed.

traditional economy

economic system in which people produce and distribute goods according to customs handed down from generation to generation

market economy

individual choice and voluntary exchange direct economic decisions