INTRODUCTION
An economic system is the ways which a country allocates its resources. It is ways in which production is done, how to allocate resources that have been produced. An economic system is aimed at solving the four economic system which are command, market, traditional and mixed system. Countries this days usually use the mixed economic system and market system. Each of the system will be discussed and analysed.
• Command economic system
In this economic system all the resources are controlled and managed by the government and in that the government produce goods and services for everybody in a country. All the decisions in an economic system are taken by the government on what to produce, where and how to produce. Sometimes this economic system does not work for people because since the government has a control to every resource, they can dictate the people.
Advantages: is that the unemployment is very low most of the people I he country are employed. The prices of goods and services are low so that everyone can afford the goods and services and also the inflation rate is low.
Disadvantages: people/firms cannot choose what they want to produce, the government tells what, how to produce. The lack of profit motive leads the businesses to perform poorly and not produce good quality prices.
• Market system
The supply and demand of products determine the price at which goods and service will be sold. Decisions concerning pricing of goods and services in this economic system is taken by the individuals. There is no government intervention as in like command system, the government can only intervene to an extent at which they need to stabilize the prices if they are too high. According to Adam Smith (1776:25) as cited in (S...
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Economic systems are affected by the two opposing systems of Capitalism and Communism. They each can meet the needs of people; however, both affect the lives of people in good and bad ways, affecting industrialized nations and nations in the process of being industrialized.
[6] Turley Mings and Matthew Marlin, [The Study of Economics: Principles, Concepts & Applications] (Dushkin McGraw-Hill, 2000) 413-414.
There are three kinds of economic systems. They are as follows. One is an economic system with the name of “custom based economy”, it is a system that is mostly found in the third world countries. In the system, every child of every generation will be thought to use the same ideas to produce the same good...
Governments regulate businesses when market failure seems to arise and occur and to control natural monopolies, control negative externalities, and to achieve social goals among other reasons. Setting government regulations on natural monopolies is important because if not regulated, then these natural monopolies could restrict output and raise prices for consumers. It is important to regulate natural monopolies because they don’t have any competition to drive down the price of the product they are selling. Therefore, with no competition, they can control the output and the price of the product at whatever they deem necessary. With regulations the government keeps it fair both for the consumer and producer. It’s also important for government
There is more freedom in a market economy so individuals are able to own and control resources and find the best ways to create goods and services. They use the consumers to their advantage by thinking of the consumer’s dollar is like a vote. Market economies are prominent in the United States, Canada, Japan, South Korea, Singapore, and parts of Western Europe. There are several advantages to a market economy one of which is having the ability to adjust to change. Market economies also give a high degree of freedom with a small degree of government involvement. The people have a voice in the economy which leads to a variety of goods and services created, and a high degree of consumer satisfaction. Disadvantages of a market economy include the inability of the market to meet every person’s basic needs. Markets also do an inadequate job of providing some highly valued services such as justice, education, and health care. Citizens of a market economy must also face a high level of personal uncertainty and the prospect of economic failure. Then there is Capitalism behind the market economy which has the means of production privately owned. The advantages of Capitalism include higher efficiency, freedom, decentralization, a smaller role of government, and a high degree of consumer satisfaction. The disadvantages include not providing the production of many free public goods from the government,
However, price controls historically is widespread, steady, and lackluster. Tight controls on prices lead resources to be unused and production to be cut short. Widespread famines assure providers a steadfast demand for inferior services and prevent them from profiting by innovating or improving quality. Prices fixed by sanction lessen enticement for providers to cut costs and encourage them to seek profits by playing politics rather than by serving their customers. Whil...
...free enterprise system is very important in today’s society. Because of the capitalistic economy people have incentives to work harder and longer and maybe entice people into starting businesses that would not have been there succeed. The law of supply and demand is a great idea for the free enterprise system because it helps producers and consumers come to an agreement on a products cost. The free enterprise system also helps companies keep striving to become efficient and to produce things cheaper so that the public can get products for cheaper. The capitalistic economy makes a way for companies to change with society in a way that businesses are happy because their sales are improved and consumers are happier because they get the products they want. The free enterprise system is the engine that drives the United States economy and continues to work to this day.
When analyzing the market, one must consider the power that buyers and sellers have. When a seller controls all of the power it is considered a monopoly, they are able to “raise [their] price above competitive levels” which makes it unfair for consumers in a market as they are only given the option to buy from that particular seller regardless of the prices they impose (Stucke, 2013 p. 1510). When a buyer controls all of the power it is considered a monopsony, here the buyer “can lower the price[s] below competitive levels for the goods and services it buys” (Stucke, 2013 p. 1510). The action a buyer takes to lower the prices can also be considered unfair to the supplier, this can “reduce the
As economies develop and change we need to look at the factors that influence this. Weather, resources, location and labor prices are a few examples of this. Another influence is government policies. There are three types of economies: command, market and mixed. In a market economy. In a command economy the government controls the economy. It decides what will be produces, wages and prices. Socialism and Communism are examples of a command economy. In a market economy the economy is controlled by individuals. In a pure market economy the government is absent from the economy. A mixed economy has element from both a command and market economy. The economic decisions are made by the people but the government plays a role in the resources. Most developed countries today have a mixed economy.
F. Y. Edgeworth, Review of the Third Edition of Marshall's Principles of Economics (socsci.mcmaster.ca) The Economic Journal, volume 5, 1895, pp. 585-9.
Capitalism is an economic system where people and private businesses are able to control their own trade and means of production for profit. It emerged as technology, production and trade began to increase. During the industrial revolution, capitalism started to influence people more. Some characteristics of capitalism are capital accumulation, competitive markets and wage labor. The government isn’t supposed to interfere with trade. Individual markets raise or lower their prices due to competition and demand for goods. There has been a lot of debate over the usefulness of capitalism. Some believed capitalism had negative effects while others saw more benefits. Adam Smith and Andrew Carnegie pushed for a capitalistic society, but had different beliefs on how economic wealth should be distributed; Karl Marx advocated for a communistic society where wealth was evenly distributed.
... economic system, one that needs no interference, and needs to type of larger organization involvement.
For instance, it is incredibly difficult to build an economy in a state that is not unified. Having no clear-cut, enforceable system of taxes has the effects of a central government without much capacity and essentially no ability to provide services. A weak central government means that individual groups can monopolize resources and any wealth generated benefits very few citizens. Further, in Afghanistan, a nation with large untapped resource wealth, a weak central government provides little incentive to unlock those resources and harness the intrinsic economic
The Economy is the backbone to society. There are many factors that operate in, and govern our society’s economical structure. Factors such as scarcity and choice, opportunity cost, marginal analysis, microeconomics, macroeconomics, factors of production, production possibilities, law of increasing opportunity cost, economic systems, circular flow model, money, and economic costs and profits all contribute to what is known as the economy. These properties as well as a few others, work together to influence the economy. Microeconomics and Macroeconomics are two major components. Both of these are broken down into several different components that dictate societal norms and views.
A market economy may therefore also be known as a free market economy. It is a type of economic system in which the trading and exchange of goods, services and information takes place. The phrase is normally applied to countries or management regions that follow this approach. It functions primarily depending upon the forces of the market, namely demand and supply. Every commodity allocates and distributes based on the principle of “price”. Generally, price of a commodity shoots up when its demand exceeds supply and when the reverse occurs.