Chapter 6 - Types of Economy Flashcards
Command Economy
An economic system where government, through a planning process, allocated resources in society.
Economic System
Complex network of individuals, organisation and institutions and their social and legal interrelationships which allocates resources.
Free Market Economy
An economic system that resolves the basic economic problems mainly through the market mechanism.
Mixed Economy
An economy where both the free market mechanism and the government planning process allocate significant proportions of total resource.
Three Main Questions
- what is to be produced?
- how is it produced?
- for whom?
The Market Mechanism
Allocation of resources through bringing together buyers and sellers who agree on a price for the product or resource being sold.
Planning Process
Allocation of resources through administrative decisions.
