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

Economic system: the organisational and institutional pattern through which choices are made about which wants to satisfy, and how to allocate resources to do this

An economic system must coordinate individual’s wants/needs. It must allocate resources efficiently to solve the problems of:

• What do we produce? Identifying which combination of goods should be produced at which points of the PPC.
• How much do we produce? Identifying the level of output
• 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