2.  An economy is a system that tries to resolve the basic economic problem and decide what to produce, how to produce, and for whom to produce.  This can be provided by the Private or Public sector

3.  What is the difference between public and private sector?  Question 1 on page 47

4.  Market Economy: doesn’t need the government as much as other types of economies.  The government provides a legal system and monetary system, defence and policing and making sure competition exists between business

5.  This relies on the government to make all the decisions on how to distribute all goods and services.

6.  This relies on the public and private sector to distribute all goods and services.

7.  Most economies in the world are mixed and rely on both the public and private sector.

8.  Mixed economy says that consumer goods and services are best provided for by the private sector or business  Others goods such as roads, education, street lighting are best provided for by the government. This is because of market failure. Business might not provide these goods in sufficient quantities

9.  Private sector goods are provided by businesses with the aim of making a profit.  Competition exist  Public sector goods are provided by the government.  The government pays private sector business to provide services such as roads, schools.

10.  Goods produced by the private sector are provided by the market system  Goods provided for by the government are for everyone that pays tax.  Welfare state is provided by the government

11.  Question 2 on page 48

12.  Goods should be produced at the lowest cost possible  Minimise the quantity of resources used  Produce goods that are needed by people.  Don’t waste  In the private sector this is done by the market system and competition increases efficiency  Efficiency and the government is more difficult.

13.  This occurs when markets operate inefficiently

14.  Externalities: production causes  Pollution and poor health  The government must try to influence these externalities  Lack of competition: monopolies lead to higher prices  Lack of information  Factor mobility: make factors of production like labour and capital move mobile. The gov can help with training

15. Economics in Practice on page 51 Keywords