Aneta Zitkova
READING 1
The Economic System
1. How are the means of production defined? Why must these means be subject so some form
of social control?
2. How do institutions affect economic processes? Why is economics “primarily a study of
institutions and their workings”?
1. a) The means of production are non-human inputs used for the production of economic
value, like tools and the raw material.
b) These means must be subject to some social control because they often lead to conflicts of
interest. A conflict between individuals or groups must be resolved in the interest of peace and
security of the business. Second, social control is necessary for maintaining order in labor and
specialization. Highly developed social rules maximize individual freedom in the use of the
means of production.
2. a) The institutions affect the economic process by regulating the use of the means of
production at any time or place. They control the enactment of legislation of electric power, the