Economics (McConnell), AP* Edition, 20th EditionChapter 2:
The Market System and the Circular Flow After studying this chapter, you should be able to: LO 2.1 | Differentiate between laissez-faire capitalism, the command system, and the market system. | LO 2.2 | List the main characteristics of the market system. | LO 2.3 | Explain how the market system answers the five fundamental questions of what to produce, how to produce, who obtains the output, how to adjust to change, and how to promote progress. | LO 2.4 | Explain the operation of the "invisible hand" and why market economies usually do a better job than command economies at efficiently transforming economic resources into desirable output. | LO 2.5 | Describe the mechanics of the circular flow model. | LO 2.6 | Explain how the market system deals with risk. |
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