Chapter 2 Homework 1. Contrast how a market system and a command economy try to cope with economic scarcity In a command economy ~ government holds all the cards, own all the property, resources and economic decision making occurs through a central economic plan. In a market system ~ Individual ownership ~ self interest. The system is characterized by private ownership of resources and the use of markets and prices to coordinate and direct economic activity. Government plays a substantial role in the economy by providing rules for economic activity, and promotes economic stability and growth. 2. How does self interest help achieve society’s economic goals? Why is there such a wide variety of desired goods and services in a market system? In what way are entrepreneurs and businesses at the helm of the economy but commanded by consumers? Self interest helps achieve goals by allowing individuals the right to negotiate binding legal contracts. This encourages investments, innovation, exchange, maintenance of property, and economic growth.
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