The economic problem of scarcity is common to all economic and political systems and to all economies, regardless of their level of development
The four basic economic questions are:
- What do we produce? Identifying which combination of goods should be produced. Is there more or less opportunity cost?
- How much do we produce? Identifying the level of output, unequal distribution, and allocation of resources
- How do we produce it? Identifying which resources (factors of production) should be used to produce goods/services
- Who do we produce it for? Identifying who should benefit from the goods/services produced
What are the types of Economic Systems:
- 1. Free Market (Capitalist): an economic system in which important economic questions are decided by interaction
between individual buyers/sellers in the marketplace (supply and demand)
Examples include Australia, US, and Canada etc.
- 2. Mixed (Dual): an economic system that relies on both markets and governments to allocate resources
Examples include most democratic countries
- 3. Pure Command (Communist): an economic system in which decisions about what to produce and the way the proceeds of production should be distributed among members of the society are made by a central planning authority
Examples include North Korea and Cuba
- 4.Traditional subsistence: an economy in which individuals produce commodities primarily for their own use and not for exchange through the market
Examples include villages in Africa, South America, and the Pacific Islands
The Economic System of a country is determined by:
1. The way in which economic resources are owned
2. The system of exchange
3. The motivation to produce goods/services
4. Level of government involvement