1. CHAPTER 2 – ECONOMIC SYSTEMS DETAILED LOOK AT 3 DIFFERENT ECONOMIC SYSTEMS

2. COMPARING ECONOMIC SYSTEMS CommunismSocialismMarket System Who owns resources?GovernmentGovernment owns basic resources; the rest are privately owned All resources are privately owned How are resources allocated? Government planners decide how resources are used Government planners allocate basic resources; market forces allocate privately-owned resources Market forces allocate resources What role does government play? Government makes all economic decisions Government makes decisions in the basic industries Government’s role limited – mostly to ensure market forces are free to work

3. FUNDAMENTALS OF A MARKET ECONOMY FundamentalsDescription Private PropertyBuyers and sellers are free to own and use private property SpecializationBuyers and sellers are able to concentrate their efforts in areas where they have an advantage Consumer SovereigntyBuyers can exercise their dominance over what is produced by freely deciding whether to buy or not to buy Government InvolvementBuyers and sellers must be free to operate with minimal government intervention Voluntary ExchangeWhen a buyer and seller agree to do business together, each believes that the benefits out weigh the costs ProfitSellers are free to attempt to maximize their profits CompetitionSellers are free to attempt to get the business of others by offering the best deal

4. Product Market Factor Market