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17th MB Chap 2 - TheMarketSystem&the CircularFlow Chapter2...

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The Market System & the  Circular Flow Chapter 2
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Overview of Chapter 2 Difference between command and  market systems Main characteristics of a market system Decision-making process of the market  system How the market system adjusts to  changes and promotes progress Mechanics of the “Circular Flow Model”
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2.1 Economic Systems An Economic System:  a particular set of institutional  arrangements and a coordinating mechanism to  respond to the economizing problem. Economic Systems “evolved” over eons of time from  Traditional to Command to Market. Economic systems differ as to:  1. Who owns the factors of production 2. Method of motivation, coordination, and direction of  economic activity
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2.1 Economic Systems The Command System:  Government ownership of most property  resources Central planning authority Government ownership of most businesses Limited personal property rights Limited personal decision-making
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2.1 Economic Systems
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