economic systems. economic questions what to produce?what to produce? –allocation of factors of...
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![Page 1: Economic Systems. Economic Questions What to produce?What to produce? –Allocation of factors of production How to produce?How to produce? –Methods of](https://reader035.vdocuments.us/reader035/viewer/2022062221/56649d9c5503460f94a8589f/html5/thumbnails/1.jpg)
Economic Economic SystemsSystems
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Economic QuestionsEconomic Questions
• What to produce?What to produce?– Allocation of factors of productionAllocation of factors of production
• How to produce?How to produce?– Methods of productionMethods of production
• For whom to produce?For whom to produce?– Distribution of goods & servicesDistribution of goods & services
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Traditional SystemTraditional System• Questions answered by custom, Questions answered by custom,
habit, religionhabit, religion
• Choices are limited, change comes Choices are limited, change comes slowlyslowly
• Family values are key Family values are key
to social structureto social structure
AmishAmish
Iroquois IndiansIroquois Indians
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Command System•Central authority Central authority
regulates productionregulates production
•Government owns the Government owns the factors of productionfactors of production
•Limited set of goods Limited set of goods producedproduced
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Market SystemMarket System• Private firms produce goods & Private firms produce goods &
servicesservices
• Private producers decide Private producers decide how much to producehow much to produce
• The “invisible hand” The “invisible hand” guides the economyguides the economy
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Mixed Market SystemsMixed Market Systems• Government acts as stabilizer of Government acts as stabilizer of
economic activityeconomic activity
• Large unions & large Large unions & large corporations can dominate the corporations can dominate the marketmarket
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• Private ownership is mixed with Private ownership is mixed with public ownership of factors of public ownership of factors of productionproduction
• Regulation of private economy Regulation of private economy may be strong or weakmay be strong or weak