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Lesson 1 Project Economic Questions and Vision The two major economic systems in the world are the capitalist (free market) economic system and the socialist economic system. The many different countries of the world usually have an economic system in place that contains elements of both capitalism and socialism. Since the philosophies of capitalism and socialism are opposite, an individual country and its economic system will answer key economic questions differently. Regardless of how much that country or society supports either philosophy, the key questions their economic system must answer are the same. One question that must be answered is, what goods will be produced? Another question is how will these goods be produced? Also there is the question to be answered, for whom will these goods be produced? The location of the economies operation on the production possibilities frontier (PPF) is also very important to production. The PPF is related to what goods are produced which depends on whether the economic system is based on capitalism or whether it is based on socialism. What goods will be produced in a capitalist economic system Is determined by what the market wants. As an example if the buyers and sellers want more computers, televisions, automobiles. houses, and entertainment or food to be produced, then the production of these products will take place. (pages 56, 57, 58, and 59 of Economics 6th edition by Roger A. Arnold) In the capitalist economic system the sellers usually respond to the buyers changes in wants or preferences also. Goods and services are produced when enough buyers exist that desire to buy those goods and services. If buyers start wanting more of a certain product than another, production usually shifts to meet the need. Capitalism is based on the concept of free enterprise and the principle of individual rights. This means freedom from private and government coercion. Production and trade help to increase the wealth that people need to support their life. In the capitalism system the person who creates the wealth is the owner of that wealth. (http://www.capitalism.org) What goods will be produced in a socialist economic system Is decided by the government in control. The government may or may not be responsive to the wants of the ordinary citizen. Some economist believe that one of the reasons for the fall of communism in the Soviet Union as well as in Eastern Europe was a decline in economic growth.