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a) drives sellers to produce what buyers want.
b) results in high price.
c) discourages people from taking risks.
d) keeps people from going into business.
In a country, privately owned business firms can produce goods or services in any lawful manner that they choose. This country has
a) a market economy.
b) a traditional economy.
c) a command economy.
d) a mixed economy.
VI. Answer the following questions:
1. Who asks the questions of What, How and for Whom to produce in a market economy? 2. What is a market in economic term? 3. Who will stay in business in a market economy? 4. What advantages does market economy have? Explain it in details. 5. What does the final advantage of me market economy consist in?
COMMUNICATIVE SITUATIONS
All countries have developed economic systems (ways of producing and distributing goods and services). Economic systems are used to answer the three basic economic questions: - What goods and services are to be produced? - How are goods and services to be produced? - For whom are goods and services to be produced?
Different types of economic systems have different mechanisms (methods) for answering these questions. Summarize the three types of Economic Systems.
Use the table given below:
| Type of economic system | What to produce? | How to produce? | For whom to produce? |
| MARKET ECONOMY | Business firms produce goods and services that consumers are willing and able to buy for prices that will yield profits for the firms. | Seeking to complete profitably in the marketplace, individual business owners decide what combinations of productive resources (land, labour, capital and entrepreneurship) they will use in producing goods and services. | Finished goods and services are distributed to individuals and households who are willing and able to buy them. |
| COMMAND ECONOMY | A central planning authority (government agency) decides what goods and services to produce. | A central planning authority (government agency) decides what combinations of productive resources will be used in producing goods and services. | A central planning authority (government agency) decides who will receive the goods and services mat are produced. |
| TRADITIONAL ECONOMY | The goods and services produced today are the same as those produced in previous generations. | The combinations of productive resources used in producing goods and services are the same as those in past generations. | Finished goods and services are traded locally for other finished goods and services. |
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