Overview: Who should decide what to do with the resources in a country? The people? The government? Both? These questions form the basis for understanding economic systems. Show
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All economies must answer basic questions like what goods and services to produce, how to produce these goods and services, and how to distribute the goods and services – using their scarce resources. The answers to these questions depend on the economic system that is in place. In a pure market economy, the basic economic questions are answered by private individuals and businesses freely interacting over time. Private property is protected, and competition and negotiation are encouraged. In a pure command economy, the basic economic questions are answered by the government, which owns the productive resources and handles distribution of goods and services. These two descriptions represent extreme ends of a spectrum. In reality, most modern economies are mixed economies -- combinations of market and command with some cultural traditions sprinkled in as well. Nations can slide along this spectrum as different leaders are elected or different social and economic goals become important. These goals are described in Concept 10 - Economic and Social Goals. Intermediate
The United States is often considered a market-based economy. While it is true that it is closer to the market side of the spectrum, the United States has significant amounts of government involvement in the economy. Taxes --which redistribute income -- are collected at local, state, and federal levels. The government provides billions of dollars of public goods and services like education, military protection and national parks, which are not allocated by market prices. On the other end of the spectrum, countries like Cuba and Venezuela are generally seen as command-based. Even in these countries, however, there are usually at least some businesses (restaurants, hotels, tour guides) that are privately owned. The level of economic freedom in a country can vary tremendously nationwide and within certain industries. AdvancedImage 9-1 To conduct a deep analysis of a nation’s economic system, there are at least five basic variables that must be considered:
Click a reading level below or scroll down to practice this concept.PracticeAssessBelow are five questions about this concept. Choose the one best answer for each question and be sure to read the feedback given. Click “next question” to move on when ready. Social StudiesCompare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. Compare traditional, command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. Support MaterialsToolkitEcon Express ConceptsFundamentalsAll academic subjects have a foundation. This domain features the key concepts upon which Economics is built. You may also enjoy ...
Concept 29: Business CycleOverview: When something goes up, does it always have to come down? This lesson explains why that saying does usually apply to an economy.
Introducing Peach State PoliticsEach week during the session, host Stephen Fowler will be answering questions from students about what goes on at the Georgia Capitol, like “Who’s in charge of taxpayer money?” or “What's the legislative schedule?"
Connect with GPB EducationWhat is it called when the government owns everything?Communism, also known as a command system, is an economic system where the government owns most of the factors of production and decides the allocation of resources and what products and services will be provided. The most important originators of communist doctrine were Karl Marx and Frederick Engels.
What economic system is owned by the public?SocialismAn economic system in which the means of production are collectively owned, usually by the government. is an economic system in which the means of production are collectively owned, usually by the government.
What is capitalism and communism?The primary difference explained in capitalism vs communism is that capitalism is an economic system that allows private ownership and promotes the idea of a free market; in contrast, communism favors collective ownership and restricts the free market with government intervention portraying a planned economy.
What is communism and socialism?Both socialism and communism are essentially economic philosophies advocating public rather than private ownership, especially of the means of production, distribution and exchange of goods (i.e., making money) in a society.
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