Role of markets in allocating resources

What are the three questions faced by all economies?

• what to produce, when to produce and who receives it.

• what to produce, how to produce and who receives it

• where to produce, when to produce and why to produce

The institutions, organisations and mechanisms that influence economic behaviour and determine how resources are allocated.

• Economic system

• Capital intensive

• Directives

• Labour intensive

An economic system where the government makes crucial decisions, land ad capital are state owned and resources are allocated by directives.

• Planned Economy

• Mixed economy

• Market economy

State owned instructions given to state owned enterprise

• Directives

• Price mechanism

An economy in which both private and public sector play an important role.

• Mixed Economic System

• Market Economic System

• Planned Economic System

An economic system where consumers determine what is produced, resources are allocated by price mechanism, land and capital are privately owned.

• Mixed Economic System

• Market Economic System

• Planned Economic System

______________________ is the way the decisions made by households and firms interact to decide the allocation of resources.

• Price mechanism

• Directives

• Capital intensive

• Labour intensive

_____________ is the willingness and ability to buy a product.

• Demand

• Market equilibrium

• Supply

____________________ is the willingness and ability to sell a product.

• Supply

• Demand

• Market equilibrium

• Market disequilibrium

Price will rise if demand ___________________.

• increases

• decreases

• stay the same