Chapter 2

Chapter 2 - Chapter 2 Economic Systems Economic system: a...

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Chapter 2 Economic Systems Economic system: a particular set of institutional arrangements and a coordinating mechanism o Command system : socialism or communism. Gov’t owns most property resources and economic decision making occurs through a central economic plan. o Market system : capitalism; private ownership of resources and the use of market and prices tocoordinate and direct economic activity. allows private ownership of capital, communicates through prices, and coord. Econ. Activity through markets (where buyers and sellers come together) in the US, the gov’t plays a large role Characteristics of the Market System Private Property : right of privat individuals and firms to obtain, own, control, employ, dispose of, and bequeat land, capital, and other property o Encourages investment, innovtion, exchange, and economic growth o Also includes patents o Freedom of Enterprise and Choice o Freedom of enterprise : ensures that entrep. And private businesses are free to obtain and use economic o Freedom of choice : enables owners to employ/dispose of property and money as they see fit. Allows workers Self-Interest : motivating force of the various economic units as they express their free choices. o Each economic unit tries to achieve its own particular goal (delivering value) o Workers maximize their utility by finding jobs with best wages and benefits etc. . o
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This note was uploaded on 02/13/2008 for the course ECON 203 taught by Professor Al-sabea during the Spring '05 term at USC.

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Chapter 2 - Chapter 2 Economic Systems Economic system: a...

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