MGTA05H3 Chapter Notes - Chapter A: Monopolistic Competition, Equilibrium Point, Market Economy

• School: UTSC
• Department: Management (MGT)
• Course: MGTA05H3
• Professor: Murphy Lawrence

Document Summary

Mgta05 section a: business in the economic context: 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. Market a mechanism for exchange between the buyers and sellers of a particular good or service: business-to-consumer (b2c, business-to-business (b2b) B2c and b2b exchanges take place without much government involvement. 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. Activities of these two markets create a circular flow. Political basis for the free market economy is called capitalism: capitalism allows private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive. Command and market economies are two extremes (opposites)