4.2 Making an Economic Decision



An economic system

  • is the organized way in which decisions are made about how resources will be used
  • is an organized model for decision making about the allocation of resources
  • includes basic resources of the economy
  • includes unlimited demand for a limited supply of resources (scarcity)
  • includes choices that must be made because of scarcity of resources
  • decides what products will be produced, how products will be produced, and for whom products will be produced



Market Place

  • marketplaces are anywhere that consumers and producers meet to interact

  • modern marketplaces can be stores, malls, internet, or traditional outdoor markets

  • interaction between consumers and producers answer three important economic questions: What will be produced? How will products be produced? For whom will products be produced?

  • markets are limited by the factors of production (resources available to producers): land, labor, and capital