economic systems

Resource Allocation

What, How, For Whom

planned economic system

all the decisions of resource allocation are made centrally by the Government

P what

the government makes all decisions about what to produce, they produce what the government planners think people want and need

P How

the government decides production methods

P For Whom

for all consumers equally

market economic system

all the decisions of resource allocation are made by private firms

M What

the products consumers want to buy

M How

In the most efficient way by maximising their output from their resources

M For Whom

for anyone who has the money to buy the product

consumer sovereignty

consumer is the most important of the economic agents

price mechanism

process which automatically happens in a free market where consumer demand sends messages to firms about what they should produce and how they should use their resources

efficiency

satisfying as many wants as possible in available resources

MX What

mixture of what consumers want and what the government thinks the population needs

MX How

mixture of in the mosy efficient and profitable way and also in the way the government thinks is best

MX For Whom

mixture of for everyone who has the money to pay and for everyone equally

technical efficiency

obtaining the maximum output from given inputs and operating at the lowest possible cost

allocative efficiency

using resources to produce the goods and services consumers most want