How Economic Systems Answer the Three Basic Questions # 3

1. What are the three basic economic questions that every society (economic system) must answer? How to produce, what to produce and whom to produce for.
2. What is an economic system? What are the four types of economic systems and how does each answer the three basic economic questions? Give one example of each. An economic system is a method used by society to produce and distribute goods and services. The four types of economic systems are Command where the government controls how the three economic questions are answered, Market where decisions are made based on voluntary exchange in markets, Traditional where the three basic economic questions are answered through tradition, and Mixed where the market and the government control how the three basic economic questions are answered.
3. While the United States is largely a market economy, how does it also reflect a combination of economic systems. Our society is run based upon the principles of the constitution which makes it traditional. The government is largely involved in the economy which makes it command. The stock market provides us with the market economy aspect.
4. The Inuit tribe in Alaska teach their children that they must always do their best at every task. The child begins by observing the adults working on a task. When the time comes for the child to do the task, the task is first divided into smaller tasks. The adults praise the child at each stage the child successfully completes. When all stages have been complete, the child if ready takes full responsibility for the task. What economic system is used by the Inuit? Explain. The Inuit tribe uses a traditional economic system because they teach their children meaning that they would have had to have been using that system for some time in order for the adults to be able to teach the children.
5. How do market, command and traditional economics systems compare and contrast with each other in terms of profit motive, private ownership, consumer sovereignty, competition and government regulation? Market and Command economies focus on profit while Traditional economies focus on providing for their people. In a Market economy their is a lot of private ownership while in a Command economy the government owns everything and in a Traditional economy everyone owns the businesses. In a Market economy consumer sovereignty regulates supply and demand. Competition is a another factor that helps regulate a Market economy.
6.Explain why Adam Smith would oppose government intervention in a market economy. Give a specific example of why you support Adam Smith’s theories of laissez faire and the ‘invisible hand’ in a market economy and one example of why you would oppose his theory? Explain. I support his theory because there is in fact an invisible hand that regulates  market economy. This means that producers will supply what consumer need most. I oppose this theory because there may be a need consumers have that producers can't supply.