ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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.

Detailed explanation-2: -A market economy is the opposite of a command economy. In a market economy, each person answers the 3 basic questions (what, for whom, how). People make decisions for themselves.

Detailed explanation-3: -One of the most important characteristics of a market economy, also called a free enterprise economy, is the role of a limited government. Most economic decisions are made by buyers and sellers, not the government.

Detailed explanation-4: -Capitalism-individuals own the factors of production and answer the basic economic questions.

Detailed explanation-5: -Economists address these three questions: (1) What goods and services should be produced to meet consumer needs? (2) How should they be produced, and who should produce them? (3) Who should receive goods and services? The answers to these questions depend on a country’s economic system.