Prices in the market system coordinate production

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Unformatted text preview: coordinate production, distribution, and consumption and represent our fifth key characteristic of market systems. 22 Learning Objective 2-2 Slide 23 Five Fundamental Questions An Economic System Must Answer 1. What goods and services will be produced? 2. How will the goods and services be produced? 3. Who will get the goods and services? 4. How will the system accommodate change? 5. How will the system promote progress (enable technological progress and capital accumulation)? Chapter 2 23 Learning Objective 2-3 Slide 24 What will be produced? The market process and price automatically address what we will produce in that producers are able to recognize how much demand exists for different goods and so long as profit potential exists to meet this demand (price is high enough), producers will respond. Consumers make this determination by voting with dollars and behaving with consumer sovereignty (being in command). Chapter 2 Learning Objective 2-3 24 Each economic system must address the following five questions: 1. What goods and services will be produce...
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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.

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