Economic Systems July 29, 2008
Posted by petrarcanomics in PPC & Comparative Advantage.trackback
Every economy must answer the three questions:
1. What to produce?
2. How to produce it?
3. For whom to produce?
Economy’s can answer these questions through three basic systems.
Command Economy – Command economies answer these questions through centralized planning, often government intervention and regulation.
Traditional Economy – Traditional economies answer these questions by following past customs accepted by society.
Market Economy – Market economies allow supply and demand to arrive at an equlibirum price which allocates the goods and services.
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