General Economics/Economic Systems

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All societies must answer three economic questions. The way that they answer those questions determines the type of economic system they use. This chapter describes how a centrally planed economy works. A single bureaucracy decides what items to produce and who gets them. The government owns both land and capital. It also controls how much people are paid. This chapter also describes socialism and communism. Socialism is the belief that wealth should be evenly distributed. Communism is when the government owns and controls resources and production.
A market is any arrangement that allows buyers/sellers to exchange things. A market allows us to exchange the things we have for the things we want. Specialization is the concentration of the productive effort of individuals and businesses and without specialization markets would not be necessary. In a free market economy, individualists make their own choices. Individualists answer the three economic questions.
Traditional Economy: relies on the 3 key economic questions.

  • what goods and services should be produced?
  • how should these goods and services be produced?
  • who consumes these goods and services?