Economic Systems SSEF4 Market Economy Answers 3 Questions

Command Economy Answers 3 Questions

Mixed Economy Answers 3 Questions

Consumer Sovereignty This is the idea that it is consumers who influence production decisions. Firms will respond to consumer preferences and so produce the goods demanded by consumers.

Consumer Sovereignty In a free market consumers have greater levels of consumer sovereignty. In command economies, goods are produced according to state dictates so there is no consumer sovereignty.

Competition Competition is one in which a large numbers of producers compete with each other to satisfy the wants and needs of a large number of consumers.

Competition In a competitive market no single producer, or group of producers, and no single consumer, or  group of consumers, can dictate how the market operates. Nor can they individually determine the price of goods and services, and how much will be exchanged.

Profit Motive Free markets form when the possibility of profits provides an incentive for firms to enter the market. Basic economic theory states that profits are earned when firms gain a revenue which exceeds the costs of production.

Private Ownership/Private Property A basic institution in a market economy, private property involves the right to exclusive use, legal protection against invaders and the right to transfer property to other. Property rights are defined, enforced and limited through the process of government.