Lesson 3 Flashcards
Refers to a set of economic institutions that dominate a given an economy with the main objective of solving the basic problems.
Economic System
Four commonly used economic
system that help solve the basic economic problems:
*TRADITIONAL ECONOMY
*MARKET ECONOMY
*PLANNED ECONOMY OR
COMMAND ECONOMY
*MIXED ECONOMY
Communal Land Ownership
-The leader decide on the management of agricultural production which is the basic of economy.
-The production, distribution, and use of economic resources are based on traditional practices.
-New technology are not welcome since
they are in contrast with the traditional
practices of their ancestors.
-The economy is only its third priority while culture and religion are its foremost priorities.
-Mines are used to gather raw materials
for production.
TRADITIONAL ECONOMY
The private sector owns and manages the means of production.
-The price system in a market structure applies to determine how much will be paid for a certain commodity and services.
-The price system in a market structure applies to determine how much will be paid for a certain commodity and
services.
-There is minimum government interference on decisions pertaining to the management of the economy.
-Existence of competition often
results in monopoly.
There is presence of economic
power.
MARKET ECONOMY
Resource allocation is done by the
government.
-Presence of central planning of all economic activities.
-There is no free competition (the government is only the seller).
-Only the government plays the role in setting legal framework for economic life production and distribution of goods and
services.
-The products or needs of the people are distributed based on priorities set by the
Committee.
PLANNED ECONOMY OR
COMMAND ECONOMY
The means of production are owned and controlled by the private sector as well as the government.
-The people decide on economic activities within the economy.
-The combinations of the best features
of capitalist and command economies
are observable in the market.
-The problem of distribution of goods and services and allocation of economic
resources are determined through a combination of the market and governmental laws and policies.
MIXED ECONOMY
Is a graph showing the various
combination of output that can produced
when all resources are being utilized in
the most efficient ( productively ) manner
possible , given the current level of
technology.
Production Possibility Frontier (PPF)
The potential benefits that an individual, investor or business
misses out on when choosing one alternative over another.
Opportunity cost
Importance of PPF:
*It illustrates the definition of economics as the science of choosing what goods to produce.
*Provides a rigorous definition of scarcity. It shows the outer limit of producible goods dictated by the law of scarcity.
*Illustrate the three basic problems of economic life -what, how and for whom.
*Illustrate the general point that we are always choosing among limited opportunities.
