2.2: Allocation of resources

Question 1

Economic system

Answer 1

Is how a national economy addresses the questions of what to produce, how to produce, and whom to produce for.

Question 2

Market Economies

Answer 2

The actions of individual consumers, firms and households in the private sector will determine the allocation of resources. There is no government intervention or regulations and no public sector

Question 3

Planned economic systems

Answer 3

Almost all the decisions about what is produced, how goods and services are priced and allocated, etc are taken by organizations that are controlled by the government. There is no private sector

Question 4

Mixed economy

Answer 4

Ownership of scarce resources and decisions about how to use them are split between the private sector AND the public sector.

Question 5

Market

Answer 5

Any set of arrangements that brings together all the producers and consumers of goods or services so they can engage in trade or exchange

Question 6

Market Equilibrium

Answer 6

A price at which, the quantity producers are willing to supply is exactly equal to the quantity consumers are willing to pay and buy.

Question 7

Market Disequilibrium

Answer 7

The quantity producers are willing and able to supply is less than the quantity consumers are willing and able to buy (vice versa)

Question 8

Price Mechanism

Answer 8

Is the key to how the market economic systems works and how resource allocation decisions are made.

Question 9

What is the problem of resource allocation

Answer 9

Deciding how to best allocate limited resources to different productive uses.