MGTA05H3 Chapter Notes - Chapter A: Planned Economy, Market Economy, Equilibrium Point
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MGTA05H3 Full Course Notes
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Section a business in the economic context. Different types of economic systems manage the factors of production in different ways. Command economy: relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions. Market economy: individuals producers and consumers control production and allocation decisions through supply and demand. Two most basic forms of command economies: communism and socialism. Communism: system in which government own and operates all sources of production. Mechanism for exchange between buyers and sellers of a particular good or service. Input market: firms buy resources from households, which then supply those resources. Output market: firms supply goods and services in response to demand on the part of the households. Capitalism: political basis for the free market economy, which allows private ownership of the factors of production and encourages entrepreneuship by offering profits as an incentive. Command and market economies are two opposites.
