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Economics - Economics Ch 2 Chapter Objectives-Command...

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Economics Ch. 2 Chapter Objectives: -Command Systems vs. Market Systems -Characteristics of a Market System -How the Markets Determine What to Produce, How to Produce, and Who Receives the Output -Change and progress in the market system -The circular flow model Economic System: -Set of institutional arrangements -Coordinating mechanism Differ based on: a- Who owns the factors of production? b- What method directs economic activities? 1. Command System : Socialism or Communism a. Government ownership b. Central planning board 2. Market System : Capitalism, Pure Capitalism a- Private ownership b- Market based mechanism Characteristics of the Market System -Private property -Freedom of enterprise and choice -Self-interest -Competition -Markets and prices -Market -is an institution or mechanism that brings buyers and sellers into contact Buyers & Sellers Decisions > Product & Resource Prices > Decisions by: resource owners, producers, consumers
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-Technology and Capital Goods a. Competition, freedom of choice, self-interest, and the potential of profits provide the incentive for capital accumulation (investment) b. Advanced technology and capital goods promote efficiency and greater output
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