Chapter 2 Economic Systems - Key

TRADITIONAL people produce and distribute goods according to customs handed down from generation to generation. COMMAND MARKET MIXED

Definition: An economic system in which

central government officials make all economic decisions.

individual choice and voluntary exchange direct economic decisions.

the government and individuals share the economic decision making process.

Factors of production owned by

sovereign, chief, feudal lord, etc (whomever tradition dictates)

the government.

individuals and businesses.

individuals, businesses, and government. Consumer choices dictate the success of goods/services with some government regulation Business leaders choose the means of production with the government regulating a fair economy

What to produce?

By custom whatever was produced in the past

The government decides what should be produced The government does the planning for production: factory locations, the occupations of workers and their salaries The government controls the distribution system for goods/services: housing, transportation, consumer items and sets prices

Consumer choices dictate the success of goods/services Business leaders choose the means of production /Their goal is the most efficient and profitable methods

How to produce?

By custom however items were produced in the past

For whom to produce?

By custom whoever usually received products will again receive them

The consumers income determines who receives which goods/services

The consumers income determines who receives which goods/services