Authors libby rittenberg 53
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police and other forms of protection in an effort to prevent tragedies such
as 9/11. People all over the world chose to produce less of other goods in
order to devote more resources to the production of greater security. And,
as of early 2009, the choice to devote more resources to security had paid
off; there had been no similar hijackings in the United States.
In this chapter we use our first model, the production possibilities model,
to examine the nature of choices to produce more of some goods and less
of others. As its name suggests, theproduction possibilities model shows
the goods and services that an economy is capable of producing—its
possibilities—given the factors of production and the technology it has
available. The model specifies what it means to use resources fully and
efficiently and suggests some important implications for international
trade. We can also use the model to illustrate economic growth, a process
that expands the set of production possibilities available to an economy.
We then turn to an examination of the type of economic system in which
choices are made. Aneconomic system is the set of rules that define how an
economy’s resources are to be owned and how decisions about their use
are to be made. We will see that economic systems differ in terms of how
they answer the fundamental economic questions. Many of the world’s
economic systems, including the systems that prevail in North America,
Europe, and much of Asia and Central and South America, rely on
individuals operating in a market economy to make those choices. Other
economic systems, including those of Cuba and North Korea today and
historically those of the former Soviet Union, Soviet bloc countries, and
China, rely—or relied—on government to make these choices. Different
economic systems result in different sets of choices and thus different
outcomes; the fact that market economies generally outperform the others
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
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