Economic system - A particular set of institutional arrangements + coordinating mechanism used to respond to the economizing problem
Command system - Socialism/communism; gov’t owns most property + economic decision-making occurs through central economic plan
Market system - Capitalism; private ownership of resources + use of markets/prices to coordinate economic activity
Five fundamental questions
“Invisible hand” - As firms seek to further their own self-interest in a market system, they simultaneously promote social interests
Problems with command systems
Circular flow diagram - Shows repetitive flows of goods, services, resources, and money through the economy