ih formative

question 1.what economic systems exist to allocate resources ?

what is an economy ?
question 2 . how do markets work ?why and how do governments intervene in markets ?
question 3 . explain in detail " different individual choices by consumers and producers in a market
system lead to the allocation of resources

Ans 1 in economics , there are certain economic systems that help in allocating resources . these
institutions , organizations and mechanisms influence economics behaviour and determine how
resources are allocated. the types of economic systems are planned economic system , mixed economic
system , market economic system and the traditional economic system . an economy is a system by
which people satisfy their wants through the process of production , exchange and distribution . the
economy functions through these different systems . The planned economic system is a organized and
centrally planned system .Its used for commands and collectivist economies .in an planned economic
system the government makes the decisions.the third economic system is a mixed economic system a
mixture of market and planed economies.it combines socialism and capitalism .this type of economy
has elements of both the economies like the elements of a planned economic system which includes
free markets of a state interventionism , or private enterprise with public enterprise they are
dependent on the government till a large extent .The fourth economic system is an traditional
economic system a traditional economic system is the oldest economic system and this economy is
based on customs , history and time-honoured beliefs . the traditional economic system is based on
traditions , customers and beliefs fully and they help shape and then import and export . the rules of
the traditional economy are based on all of these factors.in this world there were other systems like the
feudal system and the slavery system in ancient egypt which were divided by class .

Ans 2 A market is defined by a place where buyers and sellers meet . A market economic system which
is a free enterprise economy system . It is controlled by the producers and buyers and they use a term
price mechanism to signal their preferences to sellers and get money at their firm . It is a private system
and it relies on capital or labour . A market economy system works on demand and supply as the
producers will produce if there is demand and if there is demand there will be supply . The planned
economic system is a organized and centrally planned system .Its used for commands and collectivist
economies .in an planned economic system the government makes the decisions.the third economic
system is a mixed economic system a mixture of market and planned economies
Ans 3 ,As the Statement states that the choices by consumers and producers in a market system lead to
the allocation of resources . The key words of the soi are choices , consumers , buyers and producers .
The relationship between buyers and customers is the relationship of demand and supply . Demand is
the willingness and ability to buy a product.In demand , the demand and price have an inverse
relationship so that means that when demand will rise as price falls and demand will decrease as price
increases . The higher the price the less the demand as people won't be able to afford it and they would
like to switch to other products or substitutes . So , as price increases the willingness and ability to buy
a product falls .In terms of demand there are two types of it which are individual demand and market
demand , .
Individual demand -is The amount of a product an individual would be able to buy at different prices
and Market demand -is total demand of a product at different prices . We can find market demand by
adding up all the individual demands at different prices . A demand schedule lists different quantities
demanded of a product at different prices prices over a particular time period . Demand is influenced
by certain determinants like changes in income , changes im price of related products , changes in taste
nad preferences . These determinants make changes in demand which affects the supply . Supply is the
willingness and ability to sell a product .Supply is directly related to price . A rise in price will lead to
rise in supply . A decrease in price will lead to decrease in supply . If the price increases firms will be in
profit and also it will be easier for them to cover the costs of production . Demand and supply have an
inverse relationship .Supply is influenced by certain factors like the changes in cost of production ,
improvements in technology , Taxes and subsidies . These determinants of both demand and supply
lead consumer and buyers to make choices and thus it leads ot the allocation of resources .