Matthew_McCoy_Week_2_Chapter_2_Assignment

Matthew_McCoy_Week_2_Chapter_2_Assignment - Matthew McCoy...

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Matthew McCoy ECON201 Week 2 Chapter 2 Assignment June 18, 2011 Professor John Volpe 1 . Contrast how a market system and a command economy try to cope with economic scarcity. In a command economy, the government owns most property resources and decision making occurs through a central economic plan. A central planning board appointed by the government makes nearly all the major decisions concerning the use of resources, the composition and distribution of output, and the organization of production. The central planning board determines production goals for each [government-owned] enterprise so that it can reach its production goals. The division of output is centrally decided, and capital goods are allocated among industries on the basis of the central planning board’s long-term priorities (McConnell, A market system is characterized by the private ownership of resources and the use of markets and prices to coordinate and direct economic activity. Participants act in their own self- interest. Individuals and businesses seek to achieve their economic goals through their own decisions regarding work, consumption, or production. Goods and services are produced and resources are supplied by whoever is willing and able to do so. The result is competition among independently acting buyers and sellers of each product and resource. Thus, economic decision making is widely dispersed. Also, the high potential monetary rewards create powerful incentives for existing firms to innovate and entrepreneurs to pioneer new products and
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This note was uploaded on 09/24/2011 for the course ECON 202 taught by Professor Unknown during the Spring '08 term at Mountain State.

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Matthew_McCoy_Week_2_Chapter_2_Assignment - Matthew McCoy...

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