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Alba A. (1)

Chapter 2- ECN104.docx

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ECN 104
Alba A.

Chapter 2- The Market System and the Circular Flow Economic System- particular set of institutional arrangements and a coordinating mechanism to produce goods and services. 2 types.  determines what goods are produced, how, who gets them, how to accommodate change, and promote tech growth. 1. The Command System- economic system in which most property resources owned by government and a central government body makes economic decisions. ( communism). 2. The Market System- private ownership of resources and use of markets and prices to coordinate and direct economic activity.( capitalism) Characteristics of the Market System 1. Private Property- The right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property. 2. Freedom of enterprise- freedom to obtain economic resources, to use these resources to produce products of firms choosing and sell products in market of choice. 3. Freedom of choice- freedom of owners to use property resources as they see fit, and of consumers to spend income in a manner they think is appropiate. 4. Self-interest 5. Competition 6. Market and prices 7. Tech and Capital goods 8. Specialization- using resources of an individual, region, or nation to produce one or a few goods or services rather than the entire range of goods and services. a. Human Specialization( division of labour)- dividing work required
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