What is an Economy?. Free Enterprise System Standard 1 Objective 2. What is an Economy?. An ECOMONY , or ECONOMIC SYSTEM , is the ways a nation makes economic choices about how the nation will use its resources to produce and distribute goods and services. Economic Systems.
Free Enterprise System
Standard 1 Objective 2
Traditional – An economic system in which habits, traditions, and rituals answer the basic questions of what, how, and for whom.
Command – A system in which a country’s government makes all economic decisions regarding what, how, and for whom goods and services will be produced and distributed.
Market – In a pure market economy, there is no government involvement in economic decisions. Individuals and companies own the means of production and businesses compete for consumers. The market answers what, how, and for whom.
Mixed – An economy with elements of both command and market. Individuals, companies, and government decide what, how, and for whom goods and services will be produced and distributed.
The Free Enterprise System is an economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.
-American Heritage Dictionary
The Free Enterprise System is a political and economic philosophy often referred to as capitalism.