1.1.3—Basic economic questions and systems

Every economy must decide what to produce, how to produce and for whom. Market, command and mixed systems answer these questions through different combinations of prices, planning, ownership and regulation.

Institutions shape incentives and distribution: markets may coordinate information but can produce inequality or external costs; planning can pursue equity but risk weak incentives or information problems.

Identify who makes the decision, what signal or rule guides it and who bears the result.

A mixed system may let prices guide food production while government funds healthcare and regulates pollution.

No system is purely market or command in practice; evaluate the mechanism and outcome.