Economic system

The Economic System of a society is the set of relations and institutionalized procedures to which tries to solve the economic problem. Today’s world is that of “economic imperialism”, where economical factors, most importantly, money dictates all the elements of the society… (Importance Of Economics).” The Economic system is a response to the problem of scarcity, a fundamental economic challenge that all societies faced. This economic problem is caused by limited resources and unlimited wants. Scarcity resources and the possibility of alternative use forces society to make decisions about the fate of these resources. Decisions taken to address these issues have political component, and set the economic system of a society. “The role of government in the economy is nothing new; they go back to the Founding Fathers and beyond. There has been a broad trend, though, for the role of the government in the economy to expand over time (Shmoop Editorial Team).” The economy is composed of three systems: Market Economy, Planned Economy, and Mixed economy. Each of these economic systems responds to three key issues: what goods and services are to be produced and in what quantity. Companies must decide whether to produce food or appliances, vehicles or drugs, factories or farms, etc.. Second , what resources are to be employed in producing goods and services? Lastly, who will enjoy the goods and services produced?

In a market economy system, decisions about what to produce, how to produce and for who to produce are made by companies and consumers privately. Companies produce those goods and services that are profitable and for which there is demand, while consumers can choose what they buy within their means. State intervention is minimal a...

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...n of wealth while maintaining freedoms. Similarly the economic systems purpose is to allocate society's resources among different productive activities and the distribution of consumer goods and services between individuals. “Today, the economies of most industrial countries are considered mixed economies. In the Western Europe nations the government usually plays larger role in the economy than in North America (infoplease).” The economic systems answer three component questions: what to produce, how to produce and from whom to produce. These questions are key issues to the economic systems, as described previously. “The three most important economists were Adam Smith, Karl Marx, and John Maynard Keynes. Each were a highly original thinker who developed economic theories that were put into practice and affected the world's economies for generations (infoplease).”