Module 1: Economic Systems in Canada and the United States
Section 1: Market and Mixed Economies
Lesson 2 - Page 3: Market Economy (ch 6)
Try the Land, Labour, Capital drag and drop activity to test your understanding of the factors of production.
Unlimited needs and wants and limited resources result in scarcity. To solve the problem of scarcity, all societies must answer three basic economic questions.
Unlimited needs and wants and limited resources result in scarcity. To solve the problem of scarcity, all societies must answer three basic economic questions.
- What goods should be produced?
- How should these goods be produced?
- For whom should the goods be produced?
Read
Read another example of scarcity in “Economics in Action,” the comic on pages 199 to 201 of your textbook. After reading, think about a response to the questions on page 201 of your textbook. To answer the questions, consider what you now understand about scarcity, needs and wants, goods and services, and factors of production.
When you answered the questions, you should have considered the following:
In a market economy, consumer choices drive all economic decision making. Market economies are characterized by competition. Buyers compete with buyers; sellers compete with sellers. The private sector owns and controls all of the businesses. Supply and demand is based on consumer choices.
In a mixed economy, consumer choices drive a lot of the economic decision making. The public sector, however, does remove the role or need for consumers to be concerned about all of their needs. An example of this would be universal health care, which is controlled by the government and paid for by taxes.
You will see on the economic continuum, as you move to the left and there is more government control, that there will be less consumer choice. As you move to the right with the less government control, there will be more consumer choice.
When you answered the questions, you should have considered the following:
- The game manufacturer was unable to supply enough games because of the demand. Maybe the game manufacturer was unable to get enough parts to build the games, or the manufacturer controlled the amount of product released to build a demand. This is what Nintendo did with the Wii. By not producing enough games, there was a scarcity for consumers. In this way, the company created a fake demand for the product.
- The truckers may have gone on strike because of the increased costs they incurred such as high fuel prices or to protest labour issues such as non-union workers taking the jobs of union employees.
- The store may have decided to sell the game for less to have a monopoly on the market; once customers are in their store, they may purchase other more expensive products.
- People may purchase an item at a higher price because of demand or peer pressure to have the game.
In a market economy, consumer choices drive all economic decision making. Market economies are characterized by competition. Buyers compete with buyers; sellers compete with sellers. The private sector owns and controls all of the businesses. Supply and demand is based on consumer choices.
In a mixed economy, consumer choices drive a lot of the economic decision making. The public sector, however, does remove the role or need for consumers to be concerned about all of their needs. An example of this would be universal health care, which is controlled by the government and paid for by taxes.
You will see on the economic continuum, as you move to the left and there is more government control, that there will be less consumer choice. As you move to the right with the less government control, there will be more consumer choice.