Unformatted text preview: conomic systems cannot
Chapter 2 Learning Objective 2-1 7 Command systems are notoriously inefficient. Central
planners historically choose for the system to produce
too much of certain goods, not enough of others, and
have no incentives built into the process for change.
• Accurately predicting future needs for even small
groups of people is difficult because we can’t
anticipate needs in the future and how those
needs may change over time.
• In addition to the prediction quandary, consider
the notion that change would require not only
convening a planning committee, but also gaining
consensus among its members.
• When we consider having to go to such extremes
in order to accommodate changes, one can
understand why this system does not function
very efficiently. 3 Chapter 2: The Market System and The Circular Flow
8 In contrast, the market system allows private
ownership of resources and defers production and
distribution issues to the self-sustaining process of
prices in the market. The Market Syst...
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This note was uploaded on 09/10/2009 for the course ECO 2251 taught by Professor Kirkland during the Spring '09 term at Troy.
- Spring '09