The Butterfly Effect

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Economics is more than money, income, and making a profit, rather it is a study of how society manages its scarce resources; but, one change can cause an enormous effect. This is called the “butterfly effect.” In this analogy, it is hypothetically said that the flapping of a butterfly’s wings can cause a hurricane on the other side of the world. In relation to economics we see that raising or lowering the price of one item can cause the prices for various other items to fluctuate. The United States runs on the system of a market economy where the individuals and businesses make the economic decisions, while the Soviet Union had a command economy where the government decided how many goods should be made and determined prices for every item. …show more content…

A general economic problem for the Soviet Union was that there was a lack of profit incentives for productivity. The Soviet citizens would pretend to work because the government would pretend to pay them. One of the main reasons the Soviet Union failed was because seventy percent of the industrial output was going to the military, which is an unrealistic number to maintain while also supporting a country. In the Soviet Union they would create an incentive for an item, but they would get a surplus and then the items would go to waste. In the United States every individual determines their successes or failures. For example, a private owned business can only succeed if the owner and workers have the incentives to make a profit which requires marketing, networking, and putting in many hours. Americans have the incentive to make a larger profit so they can buy better food, bigger houses, and provide more for their family. These incentives lead to Americans figuring out a career path in high school, attending college, and pursuing competitive companies. The Soviet Union and the United States have contrasting economic systems in regards to their government involvement in the economy, economic efficiency, and supply/demand incentives. The Soviet Union’s government was too involved, their production was inefficient, and they lack incentives; all of which led to the collapse of the Soviet

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