The Three Basic Economic Questions

The Three Basic Economic Questions 1. What to Produce? what items to take a leak and how much of each(prenominal) item to produce using its productive inputs in the most efficient manner. 2. How to Produce? one(a) the decision has been made regarding what to produce. each country must choose which resources productive inputs ordain be utilize and in what combinations3. For Whom to Produce? Should the productive outputs be distributed ground on amicable customs, personal wealth and ownership, or mandated by the presidential term? mandated government- china no youtube or facebook (social customs- north korea the worst)Basic Economic Systems Traditional Economy unrivaled in which frugal decisions depend upon social customs and r bely changes from generations to generation. in these societies, worship and culture are more important than personal wealth and literal possessions. ( north korea, india marriage) conncected to for whom to produce in traditionMarket Economy One in w hich stinting decisions are based on private ownership, where somebodys are free to operate their own self interest. This system is often referred to as capitalism. individuals use their incomes to buy goods and services. The more income one earns, the more purchasing power they have.Command Economy One in which all productive inputs are owned by the government and central planners within that government decide what items to produce and how much will be produced how it will be produced and how output will be distributed based upon anticipated future of necessity of the economy. ex. China majority AfricaMixed Economy One that combines aspects of a market economy and a command econmy the economy uses both markets and government to make decisions. Most countirestoday fall under the change integrity eonomly definition, however in varying degrees between private and public area influence ex. Sweden, Canada, USA Economic SystemAdvantagesDisadvantagesTraditional Stability Emphasizes on spiritual and ethnic aspects of lifePoverty Lack of individual freedomsMarket Individual consumers determine what is produced and ultimately how much they are willing to pay.Encourages innovation and entrepreneurshipInstability in output due to changes in prices and/ or employment levels Private markets do not always consider the needs of society as a whole e.g. homeless shelters. If income is distributed based wholly on earnings, some individuals might not earn enough to deem the basic necessities of life. CommandMore even distribution of incomeCentral planners can focus on economic growth by directing resources in a specific direction.Lack of individual freedomsCentral planning difficulties and errors in judgmentInefficient use of resources due to the lack of profit to run the efficient use of resources