Do we want to make cars? There are many advantages to a market economy: Capital includes physical capital by way of buildings, equipment, and tools. As an entrepreneur, it is important to have a clear understanding of all your alternatives. The first question is What to produce?
Lets look at the problems in details. The production possibilities curve best illustrates this question. Once the society has decided what goods and services are to be produced and in what quantities, it must then decide how these goods shall be produced.
Is it the rich, or the poor? For example, the question of what to produce may be based on what trend is popular right now. Another Perspective[ edit ] Think about why you get up in the morning.
As an individual, for example, you constantly face the problem of having limited resources with which to fulfill your wants and needs. Some of these will be examined briefly at the end of this tutorial. Do people have to wait in line to get the goods?
This is really concerned with how the goods and services are allocated or distributed to society. There are several things which are needed to keep the household running, e. The economic system allocates productive resources in the form of land, labor, and capital. In a true command economy, what to produce is determined by a central economic authority.
Other countries believe that the market should be given a lesser role and that decisions about what, how and for whom should be made by a central authority or a government. There are various alternative methods of producing a good and the economy has to choose among them. If left to free markets i.
It also makes the claims that firms exist to maximize profit and that markets are efficient. Fields can be irrigated and hence wheat can be produced by building small irrigation works like tube-wells and tanks or by building large canals and dams.
Market economy- An example of a market economy is the United States, a market economy is where the resources of a country are owned and controlled by the people of the country, rather than the government.
The store manager must economise by choosing to use his resources to satisfy certain wants such as marketing instead of others like stock purchase.
My Question, Comment or Tip: For example, cloth can be produced either with automatic looms. The question of how to produce is usually based on the producer's choice.
A third disadvantage to this type of economy is that there is uncertainty in the business world. There are also wants, which may not have to be fulfilled per se, but will be acquired somehow.
The opportunity cost of choosing the school is the loss of the factory, and what could have been produced. Questions, Comments, Tips, and Advice Posted by:Sep 09, · The three basic economic questions are: What goods and services should be produced?
How should the goods and services be produced? For whom should the goods and services be produced?. The aim of economic evaluation is to ensure that the benefits from health care programs implemented are greater than the opportunity cost of such programs by addressing questions of _____ or _____.
We have classified economic systems according to the way they answer three basic questions of what, how, and who. A fourth question that should be asked is, "Who owns the means of production?" An economy's means of production are its capital: factories, farms, shops, mines, and machinery.
The entire stock of wheat, for example, in a country might bebushels and the price $2.
If onlybushels were offered for sale, that would be the economic or effective supply at that price, and ifbushels were sold at that price, that would constitute also the economic demand.
Chapter 1 What is Economics? Test bank MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1)An incentive A)is the opposite of a tradeoff. B)could be a reward but could not be a penalty.
C)could be either a reward or a penalty. Economics is the study of _____. • Economics is the science of scarcity. • Scarcity is the condition in which our wants are greater than our limited resources. • Since we are unable to have everything we desire, we must make choices on how we will use our resources.Download