1.

How do market systems and command systems differ in 

their handling of economic scarcity? 

Market systems let there be private ownership of resources 

and they also use market prices to coordinate economic 
activity. Command systems have public ownership of almost all 
property and resources and economic activity is determined 
through central planning. 

2. In the circular flow model, how are businesses and 

households both buyers and sellers of resources? 

Businesses sell goods and services in order to obtain revenue, 

and also buy labor, land, capital, and entrepreneurial ability to 
produce their goods and services. Households buy the goods 
and services provided by the businesses, and sell resources in 
the resource market in order to obtain income necessary to 
purchase goods and services. 

3. What is the importance of competition in relation to 

self-interest in a market system? 

Competition is the encouragement that regulates the

self-interest of the consumers and sellers.