Chapter 2

Question 1

Economic system

Answer 1

Defined as ownership of factors of production and methods used to motivate, coordinate and direct economic activities.

Question 2

The 2 polar extreme economic systems:

Answer 2

Market (Capitalism)
Command (Socialism & Communism)

Question 3

Command Characteristics

Answer 3

-Government owns most property resources
-Central economic plan
-Central planning board makes decisions.

Question 4

Coordination problems of command system

Answer 4

-Central planner had to coordinate millions of individual decisions by recourse suppliers, consumers and businesses
-Expansion of economies
-Lack of reliable success indicators
-Difficult to assign quantitative production targets without unintentionally producing distortions in output.

Question 5

Market characteristics

Answer 5

-Private property
-Freedom of enterprise and choice
-Self-interest
-Competition