LO2.1 Explain how economic systems attempt to allocate and make effective use of scarce resources effectively
Free market economy: sometimes called capitalism.in this type.in this type of economy most decisions are taken through the operation of the market mechanism . Supply and demand and to pay influence decision making. There is very little government intervention in business decision” (BPP, 2007, pp. 138-170), (Doc.mbalib.com. 2013)
Command economy:” it is refered to as state controlled .in this type of economy decisions are taken collectively, usually by centrall planning commitees.the government controles what is produced ,gow much is produced the price and who the goods are available to.decisions are intended to benefit all members
…show more content…
free market economies are very competitive. A lot of their industries are thought to be almost perfect competitive , production efficiency will hapen. free market economies distribute their resources more efficiently.
Choice. Companies will produce whatever consumers are prepared to buy. the consumer is sovereign., there are no restrictions on what the firms can produce. there will be a bigger choice of services and goods in a free market economy compared with a command economy.
Innovation. companies will be looking to produce something new to get ahead of their competitors.. there are no incentives for the busineses to be innovative. As long as they produce the essentials the planners will be happy.
Higher economic growth rates.. The most successful economy in the world (in terms of size) has been the USA, and they have been one of the freest economies in the
…show more content…
Mixed economy:”in this tipe of economy there is a balance between market forces and state intervention.the view is taken that certain activities need to be regulated by the state while others can be left to the influence of the market.a mixed economy usually comprises:
• Afree enterprise sector,where economic decizions are based on market forces
• Public ownership and control of key centrall industries
• Welfare sector to provide a minimum level of medical , social and educational services for all citizens regardless of wealth.” (BPP, 2010, pp. 138-170), ), (Doc.mbalib.com. 2013)
Transitional economy:” A transition economy is one that is changing from central planning to free markets. Since the collapse of communism in the late 1980s, countries of the former Soviet Union, and its satellite states, including Poland, Hungary, and Bulgaria, sought to embrace market capitalism and abandon central planning. However, most of these transition economies have faced severe short-term difficulties, and longer-term constraints on development.” (Economicsonline.co.uk, 2013), ), (Doc.mbalib.com.
Capitalism is an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state
The United States is known for having a free-enterprise economy where a business can be conducted freely without government involved. In free-enterprise economies, goods and services are traded openly and are produced depending on the demand. People who support this type of economy believe it motivates businesses to make money and welcome new ideas. An important part of the economy is to have full employment and low inflation.
Free enterprise is very important in an ever growing world. The idea of free enterprise, or capitalism, is that any individual has the opportunity to create a business and sell a good or provide a service with almost no government intervention. A capitalistic economy helps both the supplier of goods and the consumer of the goods. One of capitalism’s basic principles is that an individual works hard for incentives. Free enterprise means that businesses are directed by the laws of supply and demand. Capitalism also forces businesses to produce things in an efficient way. Another great aspect about free enterprise is that there is a lot of flexibility in the economy. These are just some of the many factors that make a free enterprise economy so important.
Following the end of World War II, Europe was in shambles and a drastic rebuild was needed. The war resulted in a division of Europe which led to among other things, the creation of the United Nations and the Soviet Bloc. The conclusion of World War II lead to East Germany, the Czech Republic, Slovakia, and others to align themselves with the Soviet Union through the Warsaw Pact. Each country’s future was shaped by the policies of each organization. Since the end of World War II, the Czech Republic, Slovakia, and East Germany have experienced the advantages and disadvantages of a centrally planned economy and their individual struggles to transition to a free market economy.
A market economy that fails, to address the needs of at-risk children and adults. Currie feels Americans are so focused on the economy that there is no regulation, Americans also believe, it is a free market, and that individuals are responsible for their own failures or success. This type of economy is a system in which economic resolution and pricing of goods and services are determined and focused entirely by the aggregate of country’s citizens and business with little government intervening or central planning. This means private firms account for all production. Meaning consumers decide what should be produced, based off of what they have purchased.
... economic system, one that needs no interference, and needs to type of larger organization involvement.
At the heart of any capitalist structure is the fundamental belief of economic freedom. This liberty focuses on two areas that are critical in order for any economy to survive and prosper. This economic theory refers to an individual’s freedom of choice and enterprise. By definition, freedom of choice refers to any person who is free to make his or her own economic decisions in a world of limited resources. This comprises various actors’, (consumers, savers, buyers, and producers) to behave in a purely voluntary manner. Freedom of enterprise on the other hand is a system in which governments place few restrictions on business activities and ownership. In this sense, businesses would be limited by competition and the forces of supply and demand in the marketplace. These two characteristics of economic freedom are the basics of constructing a capitalist system that promotes growth and a robust middle-class.
The major difference between a command economy and a market economy is who makes the decisions. In a command economy, the government decides what to produce, who to produce for, and how to produce. In a market economy, the people get to decide what to produce, who to produce for, and how to produce. The major difference lies with the control and who is in charge.
The word “efficiency”, in economists’ dictionary, is often interpreted into the degree of an economy allocates scarce resources to meet the needs and wants of consumers. As we can see that a free market economy is the one in which resources are allocated based on the principle of self-interests. Where there are profits, there are firms, and where there are firms to produce identical goods and services, inevitably, there is competition. The degree of competition determines the market structure which is the main determinant of the behaviour or conduct of firms. This in turn determines the efficiency in the use of scarce resources. It is often argued that competition leads to a more efficient use of resources. I agree with the statement, but not totally. In my opinion, competition would lead to efficiency and best use of resource by encouraging firms to improve productivity, to reduce price and to innovate, but in certain industries, particularly industries where the impact of economies of scale is distinctive, for example industries with great indivisibilities, monopoly is more favourable.
Capitalism is an economic system in which the production and distribution are privately owned, the government involvement is minimal,and there is free enterprise. In Capitalism, the means of production are privately owned and operated for profit in a competitive market. Also the economic investment, ownership and profits are all owned by individuals. Under capitalism the state is separated from the economy, which means that the government has no role in business. In other words, everyone works for themselves. The market forces in a capitalist country runs by supply and demand which it determines the price and later on it turns into profits. Supply is the quantity of goods and services a business is willing to sell, while Demand is the quantity of goods and services consumers are willing to buy. Therefore, Capitalism is the best economic system because it rewards the ones that work hard and since the government does not control trade, there is a large variety of goods and creates options for consumers to fit their personal needs.
Introduction Economic systems are organized ways in which a state or nation allocates its resources and apportion goods and services to the national community. An economic system is slackly defined as a country’s plan for its services, goods produced, and the exact way in which its economic plan is carried out. There are three types of economic systems exist, they are command economy, market economy, and mixed economy. Command economy is also sometimes called planned economy. The expectation of this type of economy is that all major decisions related to the construction or production, distribution, commodity and service prices are all made by the government.
Economics is the allocation of scarce resources among competing ends. To some extent, virtually everything is scarce - money, food, water, dates for the prom... but some resources are scarcer than others, and deserve special attention from those with the tools to allocate them properly. Basically scarce resources can be defined as the limit a society has on a particular resource that is less obtainable than others which are readily attainable. Some examples of some scarce resources that are found commonly in today’s society are clean air, oil, trees, coal, and natural gas. Some examples of my personal scarce resources are time, money, and energy. In a way they are all connected. I have to find a way to allocate my time to make more money but yet conserve my energy at the same time.
There are two types of economic systems that a society may adhere to; which are polar opposites. The Command system, also known as communism or socialism. In a command economy, the government owns the majority of the resources, and all decisions for the society is made based on a central plan. The command system has been adopted by countries such as the Soviet Union, China and North Korea. This economic system is commonly used by countries under a dictatorship. Despite the negative aura surrounding a dictatorship this system does have its pros and
There is increased competition- This is a consequence of capitalism. Increased competition leads to improvement in terms of quality and efficiency of production. It also leads to low prices of products in the market, as producers want to have a larger share of the consumer market. In a capitalistic perspective, businesses that produce high quality products at a low price enjoy a larger market share.
A command economy is one in which a central authority has control of the resources of the economy and makes most of the economic decisions.