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What is an economic system?
the method used by a society to produce and distribute goods and services
Explain the four basic elements of all economic systems.
traditional, command, market and mixed.
Are economic systems necessary? Why or why not?
economic systems are necessary because it is how an economy produced and distributes its goods and services.
Describe the basic characteristics of traditional economies.
Traditional economies are often based on one or a few of agriculture, hunting, fishing, and gathering. Barter and trade is often used in place of money. There is rarely a surplus produced. In other words, most of the goods and services are fully used.
Distinguish between the two types of command economic
The government has control over a command or planned economy. In mixed economies, the government has some control, while the rest is up to supply and demand. Command economies are characterized by large surpluses and shortages, monopolies, and prices set by the government.
What are the distinguishing characteristics of a market
One of the most important characteristics of a market economy, also called a free enterprise economy, is the role of a limited government. Most economic decisions are made by buyers and sellers, not the government. A competitive market economy promotes the efficient use of its resources.
How do traditional economic systems answer the economic ques-
tion, "What will be produced?"
Second, a traditional economy exists in a hunter-gatherer and nomadic society. These societies cover vast areas to find enough food to support them. They follow the herds of animals that sustain them, migrating with the seasons. These nomadic hunter-gatherers compete with other groups for scarce natural resources. There is little need for trade since they all consume and produce the same things.
How do communist command economies answer the economic
question, "How will products be produced?"
A command economy is a system where the government, rather than the free market, determines what goods should be produced, how much should be produced, and the price at which the goods are offered for sale.
How do socialist command economies answer the economic
question, "How will products be allocated?"
The state owns and controls most of the factors of production, including land and capital goods. ... Production of goods and services, as well as their prices and distribution, are centrally controlled by the state.
How do market economic systems answer the economic ques-
tion, "What will be produced?"
Producers decide what to produce given the demand they see in the marketplace in terms of their sales and the prices they get for their goods and services.
Explain two problems each with traditional, communist command,
socialist command, and market economies.
traditional: Exposed to changes in nature and weather patterns; vulnerable to market or command economies that use up their natural resources
communist command: lack of competition and lack of efficiency.
socialist command: slow economic growth, less entrepreneurial opportunity and competition
market: Distorted investment priorities, Overproduction of goods
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"Traveling in Mexico is much cheaper now than it was ten years ago," says a friend. "Ten years ago, a dollar bought 10 pesos; this year, a dollar buys 15 pesos." Is your friend right or wrong? Given that total inflation over this period was 25 percent in the United States and 100 percent in Mexico, has it become more or less expensive to travel in Mexico? Write your answer using a concrete example-such as an American hot dog versus a Mexican taco-that will convince your friend.