2. Read to Learn
Describe the three basic economic questions each country must answer to make decisions about using their resources.
Contrast the way a market economy and a command economy answer the three economic questions.

3. The Main Idea
Scarcity of economic resources forces every country to develop an economic system that determines how resources will be used. Each economic system has its advantages and disadvantages.

4. Key Concepts
Basic Economic Questions
Different Types of Economies

5. Basic Economic Questions
There are three basic...
economics

6. Basic Economic Questions
What should be produced?
How should it be produced?
Who should share in what is produced?
Deciding to use a resource for one purpose means...
This is called opportunity cost.
The methods and labor used as well as the quality of items produce…
In most societies…

7. Different Types of Economies
Different economic systems answer the three basic economic questions in different ways.
economic systems

8. A market economy can also be called a…
Market Economies
A market economy can also be called a…
market economy

9. Characteristics of a Market Economy
Market Economies
Characteristics of a Market Economy
Citizens can own their own homes, land, and businesses
Business owners decide how their businesses will be run
Business owners decide what to charge
Government works to promote free trade and prevent unfair trade practices

10. The higher the price for goods or services…
Market Economies
The higher the price for goods or services…
The lower the price…
price

11. There is a relationship between…
Market Economies
There is a relationship between…
supply
demand
the amount or quantity of goods and services that consumers are…

12. Supply and demand interact with each other to…
Market Economies
Supply and demand interact with each other to…
equilibrium price

13. Supply, Demand, and Equilibrium
Figure 2.1
Supply, Demand, and Equilibrium

14. Supply, Demand, and Equilibrium
Figure 2.1
Supply, Demand, and Equilibrium

15. Supply, Demand, and Equilibrium
Figure 2.1
Supply, Demand, and Equilibrium

16. Market Economies
_____________________________________
…is one of the basic characteristics of a free enterprise system.
________________________________is the desire to make a profit.

17. Command Economies
In a command economy…
command economy

18. Characteristics of a Command Economy
Command Economies
Characteristics of a Command Economy
The government dictates what will be produced, how it will be produced, and who will get the goods
Goods are not considered necessities
There is no competition and little incentive to produce a better product

19. Command Economies
A _________________________________ is also known as socialism.
In a moderate command economy, there is some form of __________________________ _____________________________________

20. Most nations have a mixed economy…
Mixed Economies
Most nations have a mixed economy…
mixed economy

21. How does a market system decide what will be produced?

22. In a market system, what determines how many goods and services an individual can buy?

23. Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true?

24. End of