ALLOCATION AND ECONOMIC SYSTEM

Conservation

effective, orderly and wise use

Investments

addition of capital stock

ECONOMIC SYSTEM

covers the structure of governance composed of institutions and mechanisms that deal with activities that answer basic questions on the needs of an economy

What to produce?

first economic problem or question. Goods and services are produced typically in response to identified consumer needs and wants

How to produce?

Due to limited resources which could be in the form of raw materials or labor, firms have to decide the process of production in a way that cost is minimized and productivity is maximized.

For whom to produce?

it is important to know the target consumers. Some goods or services are produced only for a certain segment of the population.

Allocation

The mechanism that deals with the distribution of economic resources to answer the problem of scarcity

TRADITIONAL ECONOMY

This type of economy answers problems based on the customs, traditions, beliefs and norms of the society.

MARKET ECONOMY

The production of goods and services takes place in a free market. Each participant acts according to his or her own self-interest.

PRIVATE OWNERSHIP

Most goods and services are privately owned. Owners can earn a profit from their sale or rental of property, products, or services.

COMMAND ECONOMY

The economy is under the control and regulation of the government. The government has full power to make optimal use of land, labor, and capital to achieve economic goals.

MIXED ECONOMY

A hybrid system of Market and Command economy.  Allows free movement of the market but the government may intervene in prices and consumer safety.