Economic Systems & the 3 Economic Questions

What is an economic system?

A way of organising the production and distribution of goods and services

What are the three economic questions?

What to produce? How to produce? For whom to produce?

What does “What to produce?” mean?

Deciding which goods and services to produce based on what consumers want and other factors

What factors affect what producers decide to produce?

Established habits, changing tastes, marketing and advertising, and technological change

What does “How to produce?” mean?

Deciding how to combine land, labour and capital to produce goods and services

What are the three resources used in production?

Land, labour and capital

What does “For whom to produce?” mean?

Deciding who receives goods and services, usually based on who is willing and able to pay

What are the 3 resources used in production?

Land = raw materials, labour = workers, capital = equipment