The state also plays an important role in determining how goods and services are distributed, that is, in deciding who gets how much of what. In a mixed economy both market forces and government decisions determine which goods and services are produced and how they are distributed.
Which type of economy distributes?
A command economy is when government central planners own or control the means of production, and determine the distribution of output. Command economies suffer from problems with poor incentives for planners, managers, and workers in state-owned enterprises.
What determines the production and distribution of goods?
The government decides the means of production and owns the industries that produce goods and services for the public. The government prices and produces goods and services that it thinks benefits the people. The government allocates its resources based on these objectives and considerations.
How does the distribution of goods and services work?
DISTRIBUTION OF GOODS AND SERVICES. The simple answer is that distributors lower the costs of market transactions in a specialized economy. First, distributors lower the costs of market transactions by taking advantage of economies of scale and scope. For example, retail stores typically offer many varieties of goods.
Why are products not sold directly to the consumer?
DISTRIBUTION OF GOODS AND SERVICES. It is not unreasonable to wonder why all products are not sold directly from producer to final consumer. The simple answer is that distributors lower the costs of market transactions in a specialized economy.
Who is the distributor of goods in the market?
For those goods produced for the market, the general merchant was the key distributor. The merchant bought goods of all types and was the ship owner, exporter, importer, banker, insurer, wholesaler, and retailer.
What happens to the economy when consumer spending goes down?
These additional components of the gross domestic product aren’t as critical as consumer spending. Even a small downturn in consumer spending damages the economy. As it drops off, economic growth slows. Prices drop, creating deflation. If slow consumer spending continues, the economy contracts. But too much of a good thing can also be damaging.
