Micro 1.2-Economics Badges (Economic Systems)

An economic system is the way in which people decide to organize the production, distribution, and consumption of goods

and services.

What, how, and for whom to produce are the basic economic questions that every society must answer.

All societies answer the three basic questions in the same way.

In a command economy, a central authority makes the decisions regarding what, how, and for whom to produce.

The three basic economic questions are: What to produce? How to divide labor in production? And Who owns the productive resources?

In a market economy, only the government decides what goods and services are produced.

In a command economy, consumer purchasing decisions determine what will be produced.

In a command economy, the government decides how the goods and services that are produced will be distributed.

In a market economy, decisions regarding production and consumption result from the interaction of consumers and

producers.

The US economic system is a pure free market economy.

A command economy demonstrates Laissez-Faire Economics (A government hands off approach)

Command economic systems are also known as socialism or communism.