Economics: Theory and Practice, 10th Edition

CHAPTER 2

Economic Decision Making and Economic Systems

CHAPTER OBJECTIVES

To introduce the basic economic choices that must be made in every society because of scarcity.

To describe differences among traditional, market, and planned economies, and how the basic economic choices are made in each of these systems.

To explain the basic philosophy, structure, and operation of market economies.

To explain why, where, and how government intervenes in mixed economies, chiefly the U.S. economy.

To evaluate the strengths and weaknesses of various economic systems.

To describe how economic systems relate to individual and collective economic decision making.

To explore the transition from planned to more market-oriented economic systems experienced in several major nations.

To consider the British foundations of the U.S. economy.

To highlight major historical periods in the United States that have shaped the U.S. economy.

Chapter 1 introduced the basic concept of scarcity that underlies the study of economics. No economy, no matter how large or sophisticated, can provide all the goods and services to satisfy every member's wants and needs. Thus, people in every economy must make decisions about what goods and services to produce, how to produce them, and who will receive the goods and services that are produced. In this chapter, we focus on these decisions and how they are made in different ...