Econ unit 1: 1.3 economic systems

What are the three basic economic questions?

What to produce? How to produce? For whom to produce?

How will my job be determined in a traditional economy?

by a traditional system. You would do what has always been done

what system usually fails?

centrally planned bc the gov doesn't have good inputs. People don't have a say.

Define the term "economic system."

how a country allocates scarce resources

Name each economic system for part a below. Then answer the following (parts b-d): Centrally planned/command economy Traditional Economy Market Economy Mixed Economy

1. Answers 3 basic Q's through the government. It allows what, how, who for all goods. The government has all control. 2. Addresses the basic economic Q's through traditional systems. It will produce what they have always produced. 3. Answer economic Q's through forces of supply and demand. When people are willing to pay for that good, the market will supply it. 4. Answer economic Q's through a combination of market/ command economies. Free market prevails most of the time, and the government supports free market allocation of resources, but the government steps in to reallocate resources to fit a specific goal.

What type of economic system does the United States have? Explain.

Mixed economy. It's a free government but the government intervenes sometimes to reallocate resources for a specific goal.

How are resources allocated in a market economy?

Resources are allocated according to consumer preference. It is based on the demand of the people. The government has a limited role.

Who answers the three basic economic questions in a centrally planned economy?

the government