The American Economic System Assignment Example | Topics and Well Written Essays - 1250 words

The American Economic System - Assignment Example In communism, the government owns almost all economic resources and the people work to contribute to the benefit of the society. Since the for governments in the command economies decide the products that will be produced, usually considering the need of the government only, the consumer has the greatest influence in the capitalist economy. The four economic questions are: what goods and services, and how much of each, will be produced; how will these goods and services be produced; for whom will these goods and services be produced; and who owns and who controls the major factors of production. In a free enterprise economy, the individuals or businesses are free to answer each question within the limit of the laws of the government. The consumer has a voice in answering these questions by demanding that specific products are offered. Without a demand, there is no production in a capitalist economy. The government simply looks out for the best interests of the consumer and ensures that competition can exist within each industry for businesses to grow and prosper. There are four types of competition that include perfect competition, monopolistic competition, oligopoly competition, and a monopoly. Perfect competition exists where there are many buyers and sellers of a product and no single buyer or seller is powerful enough to impact the price of the product. Monopolistic competition exists where there are many buyers and sellers, but the sellers all provide a similar product and using product differentiation to compete.   An oligopoly is a situation where there are few, very large sellers.   Although the number of competitors is low, it takes high investments to compete in this market.   Lastly, a monopoly is where there is only one seller and the seller is likely able to control the price of the product.