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
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.
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