ECON 101 Lecture Notes - Planned Economy, Mixed Economy, Unit
30
ECON 101 Full Course Notes
Verified Note
30 documents
Document Summary
Scarcity means there is not enough for everyone so society must decide how resources will be allocated (distributed). The way these questions are answered determines the economic system. An economic system is the method used by a society to produce and distribute goods and services. Economic systems: command (centrally-planned) economy, free market economy, mixed economy. In a centrally planned economy (communism) the government : owns all the resources, answers the three economic questions. There is little incentive to work harder and central planners have a hard time predicting preferences. Characteristics of free market: little government involvement in the economy. (laissez. Faire = let it be: individuals own resources and answer the three economic questions, the opportunity to make profit gives people. Incentive to produce quality items ef ciently: wide variety of goods available to consumers, competition and self-interest work together to regulate the economy (keep prices down and quality up). Example of how the free market regulates itself:
