Economics Question Essay Example | Topics and Well Written Essays - 500 words

Economics Question - Essay Example A market system lets the market decide what is produced. A lot of different price points—effectively the invisible hand—decide where resources go and what prices should be. Production is decided by supply and demand. In a socialist economy the government or a committee decides they would like more butter or more shoes produced in the current year and choose a quantity for production that they believe will be sufficient (it rarely is—or it is far too much). Describe the theoretical mechanism in which consumers are sovereign, who consumers really decide what goods they want and how they demonstrate those decisions and desires. Is there a contradiction between the statement that businesses decide what is produced and the idea that consumers have sovereignty? Consumers are sovereign in so far as in a market economy their demand decides what products are produced. Businesses decide what to produce based on their reading of consumer demand. Businesses fail when they have not properly estimated the demand for their product. Consumers are sovereign. National defence – this is too important to outsource to the market; Some health care such as Medicare and Medicade. Maintaining national parks. Taking taxes. The Federal reserve system that centrally plans monetary policy. Stimulus spending in times of