The central coordinating mechanism in a market economy.
Explanation of Solution
A market economy is a system in which decisions related to the economy and the pricing of products and services are directed by the exchanges that take place between country’s citizens and businesses. The central coordinating mechanism in a market economy is the price mechanism. The price mechanism is the system where the
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Chapter 3 Solutions
Macroeconomics
- The market economy does have the advantage of increased efficiency, productivity, and innovation. However, what are some of the disadvantages of a market economy?arrow_forwardWhy is the law of demand and the law of supply a useful economic model?arrow_forwardIn a market system, provide an example for when government can enhance or harm any of the processes involved in terms of what should be produced, how it should be produced, and for whom.arrow_forward
- What are the human behaviors economists should observe when creating economic models?arrow_forwardWhy do most economies in the world today operate somewhere in between a market economy and a command economy?arrow_forwardWhat does the Powerbar model tell us about how creativity fits into a market economy?arrow_forward
- What are the main differences between a capitalist (market-based) and socialist (command) economic system?arrow_forwardName a type of market failure and explain why this market failure results in economic inefficiencies.arrow_forwardIn planned economic systems, government agencies control both supply and price of the products. True or False?arrow_forward
Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co