and services based on demand. (In a command economy, by contrast, the government owns resources and

businesses.) Supply of goods and services depends on what the demands are. A person’s income is based on

their ability to convert resources (especially labor) into something that society values. The more society values

the person’s output, the higher the income (think Lady Gaga or LeBron James). In this scenario, market forces,

not governments, determine economic decisions.

Most economies in the real world are mixed. They combine elements of command and market (and even

traditional) systems. The U.S. economy is positioned toward the market-oriented end of the spectrum. Many

countries in Europe and Latin America, while primarily market-oriented, have a greater degree of government
20 1 • Welcome to Economics!

involvement in economic decisions than the U.S. economy. China and Russia, while over the past several
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