AP Micro Unit 1.2: Economic Systems
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Created from Mrs. Chaiken's practice sets.
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7 Terms
Basic Economic Question #1
WHAT goods + services should be produced?
Basic Economic Question #2
HOW should goods + services be produced?
Basic Economic Question #3
WHO should recieve the goods + services?
Market Economy
People have to make economic decisions which determine what is made, how goods are made, and who will consume the goods.
Allows buyers + sellers to exchange goods and services
Ex: Canada, UK, Germany, Netherlands
Command Economy
The government makes all the economic decisions (what to produce and how much it will cost)
The Government owns the land + capital and controls the labor force. Consumers have no say in what is produced
Ex: Cuba, North Korea
Mixed Economy
Combination of private and state sectors. The government plays a role and steps in when needed
Ex: USA
How do property rights help create incentives for productivity?
Property rights give people legal control over things. The clear ownership lets people keep the money or value they make. Because they keep the rewards, they want to work hard and use resources well.