Concepts
- Functions of an Economic System
- What to Produce?
- How to Produce?
- Who Gets It?
- Command Economy
- Centralized Decision Making
- Market Economy
- Property Rights
- Role of Incentives
- Invisible Hand
- Prices
- Mixed Economy
Overview
Who should make the most important decisions when it comes to an economy? The government (public sector) or the market (private sector)? These decisions are often referred to as the “3 Economic Questions.” What to produce? How to produce? and Who gets it? In a command economy, the government makes the major economic decisions based on central planning. In a market economy, markets and prices provide the answers to these major economic questions. Each system has unique characteristics that will be discussed in this lesson as well. Finally, we’ll talk about mixed economies where some major economic decisions are made by the government, while other major decisions are made by markets.
Materials
Lecture
Cuba: Market Economy vs. Command Economy
Economic Freedom vs. Government Planning
The Price System
The Invisible Hand
Economic Systems Lecture
Quiz
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