Podsumowanie modelu obiegu okrężnego gospodarki, który demonstruje współzależność gospodarstw domowych i przedsiębiorstw w systemie rynkowym
|A place where buyers and sellers meet to engage in mutually beneficial, voluntary exchanges of goods, services, or productive resources
|The owners of resources—supplied to firms in the resource market—and the buyers of goods and services—demanded from firms in the product market
|Business entities that demand land, labor, and capital from households in the resource market and produce goods and services, which they supply to households in the product market
|Where households supply land, labor, capital, and entrepreneurship/technology to firms in exchange for money
|Where firms supply goods and services to households in exchange for money
|A system of allocating the means of production and the goods and services produced in an economy
|The payment firms make to households in exchange for their labor
|The payment firms make to households in exchange for land
|The payment firms make to households in exchange for capital
|The payment to entrepreneurs who start or own businesses
|In its purest form, a market economy answers the three economic questions by allocating resources and goods through markets, where prices are generated.
|In its purest form, a command economy answers the three economic questions by making allocation decisions centrally by the government.
The circular flow model illustrates how a market economy works. In the model, households and firms engage in mutually beneficial exchanges of resources and products in the market.
Households are the owners of the factors of production and sell labor in exchange for a wage, land in exchange for rent, and capital in exchange for interest. Firms sell goods and services in exchange for money.
|In exchange for
|In factor markets
|In factor markets
|In factor markets
|Goods and services
|In product markets
In the model, money flows in one direction—counterclockwise—and goods, services, and resources flow in the opposite direction—clockwise. In a market economy, one of the main functions that money serves is to facilitate the exchange of goods in the product market and the exchange resources in the resource market.
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Property rights are the ability to own and use resources (and anything made from those resources). Property rights are like the rules of a game such as soccer or hide-and-seek. When everyone knows the rules, and those rules are consistently enforced, people can focus on playing their best and having fun.
An economic system is any system of allocating scarce resources. Economic systems answer three basic questions: what will be produced, how will it be produced, and how will the output society produces be distributed?
There are two extremes of how these questions get answered. In command economies, decisions about both allocation of resources and allocation of production and consumption are decided by the government. In market economies, there is private ownership of resources—established though property rights—and the factors of production and consumption are all coordinated through markets. In a market system, resources are allocated to their most productive use through prices that are determined in markets. These prices act as a signal for buyers and sellers. Most economies are mixed economies that lie between these two extremes.
In either system, a rational agent would allocate resources and production using marginal analysis. In command economies, this is more difficult to do because without markets, prices fail at being an effective signal.