Economics, in one aspect, is the study of how individuals, societies, and countries manage to deal with the problem of scarcity. Scarcity is a problem within economics because the wants of people are unlimited and the resources available to fulfil those wants are finite (Sloman, 2001). The answer to scarcity is efficiency which Gowland and Paterson (1993) described as the most benefit from a certain amount of scarce resources. Within the economic system, there are several types of economies, each generating a different level of efficiency. It is said that an economic system that has allocative efficiency, productive efficiency, and equity will be effective. Along with the latter mentioned, the division of labour and comparative advantage, when exploited also bring about the effectiveness of a system. Within an economic system there are two contrasting ideals: the market economy and the planned economy. A free-market or laissez-faire economy makes decisions on an individual level with minimal government intervention. On the other hand of the spectrum lies the planned economy where all economic decisions are made by the government (Sloman, 2001). Both economies have their advantages and disadvantages. In a free-market economy there is freedom of choice, high incentives, and the belief in consumer sovereignty, yet, there are problems such as inequality of income, macroeconomic instability, and the chance of market failure. Likewise, though a planned economy has advantages such as low levels of unemployment and equal distribution of income, there is a loss of personal freedom and lack of consumer choice. Many people feel that efficiency lies in the free-market economy where one can easily answer the questions what should be produced, how it should be produced, and for whom. However, the problem with this ‘capitalist’ economy is that poverty and boom and bust cycles reduce progress (Economic Systems: How Societies adapt to Problems, 2003). “If you care about economic efficiency, you should like free markets…But they would also believe the second one should be qualified, in addition to its stabilisation and distribution functions, governments will be needed to correct market imperfections…” (Rhoads, 1999, p.66) Rhoads (1999) mentions how a market economy leans towards more efficiency but needs the government sporadically, a combination which makes the so-called mixed economy. A mixed economy which leans towards laissez-faire, as in the case with the U.S or the United Kingdom, is rather successful. On the contrary, countries, such as Burma or North Korea, which slant towards a planned economy, lack progress. Along with allocative efficiency, how resources should be allocated, productive efficiency, which production method should be utilised, and equity, “specialisation and exchange are both necessary to have an efficient economy” (Demmert, 1991 p.3). Specialisation comes in the
Every society should answer three economic questions, which are what to produce? , how to produce? , for whom to produce? The reason why a society should choose what to produce is because a product of one society’s choice is not necessarily the choice of the other choice. A society should decide how to produce goods, it is due to the fact that not all societies have the same resources, some societies may have a lot of people in them so, if they want to produce a good, they can use their human resources to accomplished their task, in the other hand societies with a low populations but a high amount of machines, can use their resources to finish their task. Some countries may be able to provide items that other countries can not, because their economy is better than those countries.
The allocation of scarce resources to people’s unlimited wants is a vital aspect of life which affects both welfare and fairness, and just how much each person gets depends on the economic system in place. In this essay I aim to argue in favour of regulated capitalism and show that it is in fact efficient, fair and practicable. In doing this, I will start by looking at the extreme cases that economic systems can take on and how these prove to have short comings. On one end of the spectrum we look firstly at pure capitalism and on the other end, pure socialism. I then go on to look at the consequences of these systems to identify the morally correct one based on the consequences that the economic system brings about. I will then end off by examining the best system, regulated capitalism, which refers to a system which acknowledges the flaws of pure capitalism and rectifies them by including socialist aspects to the system.
Economics can be said to be the science which studies the relationship between scarce resources, with alternative uses, and consumers’ unlimited wants. Therefore the ‘problem’ of resource allocation can be seen to be central to the basic economic problem. In this way , how resources are allocated throughout an economy is of great importance and different types of economies employ different methods to achieve this allocation.
To Summarize, Microeconomics illustrates which cause of departure from the economic efficiencies and the result of decline and social welfare at its maximum potential even though the efficiency of production, efficiency of production among the consumers, and the allocation economic efficiency are included in economic efficiency. Even though economic efficiency shows us the way of how the economy works, it should be noted that microeconomics does not study the economy as a whole but a small part and inter-relationships of every
When it comes to financial planning, economics plays a major factor in people’s personal finances in many ways, it is an essential part of the world we live in today. When you buy gas, or shop for groceries, plan a vacation, economics is at the core of those choices. So why does economics play such a vital role, what is the driving force behind this? In its simplest form, it’s based on choice. We will look at a few factors that impacts financial planning and the economy, including the use of credit, and how the government affects the economy.
Capitalist economies hold that individuals have the means of production and that people have the potential to gain unlimited wealth. Rather than the government, private sectors oversee production, employment, and investments for the population. These tenants are made possible with the idea of laissez-faire in which the government is hands off and there are no regulations in the economy. According to Adam Smith, a distinguished expert in modern capitalism, a society free of government intrusion and rules is one where the economy and the people can thrive the most (Magstadt). In theory, laissez-faire allows all people to attain the level of prosperity they want and use their self-interest to do so. Upon further examination, it is found to be the opposite, that not all people are equally gifted this opportunity.
Since the origin of supply and demand mankind has done its best to harness the unpredictable tendencies of the economy. To this day it is still a process of trial and error in deciding which economic system works best for the world’s economy. Socialism, capitalism and Keynesian economics are all philosophies that show promise on paper and have been put to the test across the world. Although there are benefits to each one of these systems, they all seem to fall short when met with reality.
Today, more than ever, there is great debate over politics and which economic system works the best. How needs and wants should be allocated, and who should do the allocating, is one of the most highly debated topics in our current society. Be it communist dictators defending a command economy, free market conservatives defending a market economy, or European liberals defending socialism, everyone has an opinion. While all systems have flaws and merits, it must be decided which system is the best for all citizens. When looking at both the financial well being of all citizens, it is clear that market economies fall short on ensuring that the basic needs of all citizens are met. If one looks at liberty and individual freedom, it is evident that command economies tend to oppress their citizens. Therefore, socialism, which allows for basic needs to be met and personal freedoms to be upheld, is the best economic system for all of a country’s citizens.
The economics, as an independent subject has already existed in this world for a long time. Maybe some people believe that the knowledge which is contained in economics is so far from them that it is not necessary to consider about is. Actually, economics always hides in our daily life and effects decisions what we made. Once I have hold the same opinion of economics is not really my business, but I do not think like this any more after I studied this subject. Economics no longer acts as an abstract terminology lying on the textbook far away from me, this word became meaningful and I am sure it will make some changes not only in my mind, but also in my future life.
An economic system must solve the main ‘economic problem’ of a scarcity of resources matching unlimited wants and how to allocate these resources. Within different political and economic systems there are many different theories of how best solve the economic problem. For example; In free market economies;
My topic is based on economic systems. I am going to discuss what the three main economic systems are and what they have to offer to their county/society. The economic systems are going to be defined and discussed in great detail. They will include material along the lines of government involvement, ideologies, goals, features and geographic establishments. Furthermore, a brief history of the economic systems will be uncovered. Economic systems and culture are going to be examined. I will also review the importance of internationalizing firms being aware of the differences between economies. This will be explained by focusing on economic transition followed by a publication that displays two countries of opposite economic systems merging for the sake of higher profits. Last but not least, the government involvement in the free market system will be clarified. I am going to be explaining how
The world’s economies continue to be divided on by whom their means of production benefit, supply, enrich, and protect. Many debates and altercations have been a result of disagreements between capitalists and socialists. Socialists believe the government is essential in providing equality for all and the allocation of capital goods. But the strength of capitalism can be attributed to an incentive structure based upon the three P’s: (1) prices determined by market forces, (2) a profit-and-loss system of accounting and (3) private property rights. The failure of socialism can be traced to its neglect of these three incentive-enhancing components. (Perry) Socialism gives power to the government to regulate the goods produced, the amount of goods produced, where the goods are distributed, and the price of the goods. This command system does not allow for the creativity, wealth, and freedom that capitalism supplies the citizens. Capitalism provides a market system that permits companies to regulate the economies themselves. Capitalism offers the world’s economy the freedom to manage itself, diversify, prosper, fail, and freedom from regulation in order to supply the world based on demand and creativity. Capitalism is the only social system that rewards merit, ability and achievement, regardless of one’s birth or station in life. Capitalism is the only social system that rewards virtue and punishes vice. This applies to both the business executive and the carpenter, the lawyer, and the factory worker. (Thomson) Capitalism is the world’s dominant economic system. Within it, the means of production and distribution are owned by individuals: private ownership and free enterprise are believed to lead to more efficiency, lower prices, be...
One of the first and major differences between a Communist and Democratic government is their contrary economic systems. In a communist government, the community owns the major resources and means of production. The goal of such a system is to prevent any one person or group of people from becoming radically rich, while others are extremely poor. The system attempts to eliminate lower class by balancing the wealth between rich and poor, therefore giving everyone equal pay and ownership. Unfortunately, this results in an increased lower class. However, in a Democracy, free enterprising is permitted, and smiled upon. ? Here, free enterprising helps the economy to flourish. People can organize their own businesses and receive their own profits if it succeeds, or debts if it fails. In this system, the harder a person works, the more money they receive, allowing them to ‘make ends meet.’ The downside to democracy is that people can get a high paying job through education, but may work just as hard at a lower paying job and receive less money. As Winston Churchill once said, "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries." Generally, Democracy’s seem be more successful economically.
The concept of perfect market allocation of resources was in W. Baumol's (1988,631), view largly theroretical. Baumol believed that economic models relied upon the concept of the invisible hand first discussed by Adam Smith. In these models, the perfectly competetive economy was able to allocate resources efficiently, without the need for market intervention by outside agents, including governments. However, there were significant weaknesses in these models particuarly in the area of ensuring equity of acess, social objectives and in the provision of public goods.
Managerial decisions are an important component in achieving the objectives of the organization. The success or failure of a business depend upon the decisions made by managers (Jurina, 2011). Today’s increasing complexity in the world of business brought forth greater challenges for both the firm and its managers. The rapid rate of technological and digital advance as well as greater focus product innovation and processes that influence marketing and sales techniques have contributed to the increasing complexity in the business environment.