1.2 Resource Allocation and Economic Systems

Define how resource allocation is influenced by the economic system adopted by society.

• Resource allocation involves answering three basic questions: What goods and services to produce? How to produce those goods and services? And who consumes those goods and services?
• Resource allocation is significantly influenced by the economic system adopted by society, such as command economy, market economy, or mixed economy. Each system involves a particular set of institutional arrangements and a coordinating mechanism for allocating scarce resources and distributing output.
• Enduring understanding MKT-1: Most resources are scarce, and in most cases the use of resources involves constraints and trade-offs.