Because resources are always scarce compared to people’s wants, all societies must make choices about what to have and what to give up. How those choices get made depends on a society’s economic system.How do societies decide who gets what?Every society is faced with three economic questions:Whatgoods and services should be produced? How should they be produced? Who should get what is
produced?How a society answers those questions depends on its economic goals. These goals include economic freedom, efficiency, equity, growth, security, and stability.Who decides what in different economic systems?Over time, societies have developed three economic systems to answer these questions.In a traditional economy, decisions are dictated by customand the ways of ancestors. In a command economy, a powerful ruler or government makes decisions. In a market economy, decisions are made by the interactions of individual producers and consumers. Each system emphasizes different economic goals.How do mixed economies divide the decision making?Most countries today have a mixed economy, in which both the government and individuals have a voice in economic decisions.Who decides what varies greatly. Some countries, including the United States, minimize government regulation of the market. Others, such as China, still exercise considerable government control over economic activities.What are the key characteristics of the American economic system?Americans describe their economy as a free enterprise system.This system has seven key characteristics.•Economic freedom to buy and sell what we want and work where we want•Competition among firms, which try to attract customers with new and better products•Equal opportunity to make the best use of our talents, abilities, and education•Property rights that allow us to buy, own, and sell goods and intellectual property•Binding contracts, which give us confidence that others will abide by their agreements•The profit motive, which provides an incentive to work and start new businesses•Limited government that regulates without controlling individuals, firms, or the market
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