...Lindsay MacIsaac Concept 1 – Economic Systems DEFINITION An economic system allocates a nation’s resources among its citizens. Different systems vary in who owns and controls these resources, which are known as the factors of production (labour, capital, entrepreneurs, and natural resources, as well as physical resources and information resources). A command economy relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions. In market economies, individuals—producers and consumers—control production and allocation decisions through supply and demand. Most countries rely on some form of mixed market economy—a system featuring characteristics of both command and market economies. ROLE A major determinant of how organizations operate is the kind of economic system that characterizes the country in which they do business. To be successful, an organization must recognize how much control it has over the production and allocation of the factors of production. Operating in a command economy, such as communism or socialism, requires much different business strategies than operating in a market economy, such as capitalism and input and output markets. Unlike command economies, market economies function on a circular flow of supply and demand between firms and households. APPLICABILITY Canada’s mixed market economic system resembles a type of market economy known as “laissez-faire...
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...Which economic system is best suited for handling a crisis of epic proportions (hurricane, flood, blizzard, forest fire, etc.)? Why? (9 points) Describe and explain why a socialist system might be the best in responding to the needs of people struck by an emergency situation like the earthquake that occurred in Haiti in January 2010. (9 points) Use the laws of supply and demand to explain why the cost to heat our homes and businesses goes up in the winter time. Be sure to explain your answer fully (9 points) Include APA style in-text citations, as well as a reference section. (3 points) Economic system is the policies that define a society’s particular economic structure. The rules by which a society allocates economic resources. Communism * State ownership of all major productive resources * Absence of economic classes * Few opportunities for entrepreneurship Socialism * State ownership of certain productive resources * Managed efforts to minimize dramatic differences between economic classes * Opportunities for entrepreneurship, with varying degrees of restrictions Capitalism * Private ownership of most productive resources * Few efforts to minimize differences between economic classes * Government policies actively support entrepreneurship All economic systems are based on certain fundamental principles about how a country should allocate its resources to satisfy the needs of its citizens. Most modern economies exhibit a combination...
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...Economic systems There is 3 main types of economic systems, difference between them are how much Government controls economy. • Free Market economy • Command economy • Mixed market economy Free Market Free market economy is also called Capitalism. Nearly all of the country's factors of production are owned privately. Basically, firms can sell anything they want. They effectively respond to the consumers, who are allowed to buy anything that is sold by the producers. Everyone in this system is motivated by pure self-interest. There is very high level of competition in this type of market and it has numerous buyers and sellers because there is no barriers to entry or exit. Firms are seeking to maximize their profits while consumers seek the greatest benefit for the lowest cost. Also workers are trying to maximize their wage relative to the cost of working. Individuals are free to make their own decisions like where to work or what to buy. Firms are free to choose what to produce and who to sell to. Prices are determined by supply and demand – prices may rise if there are shortages of a product or demand is high. Problems with free market economy: Some consumers are unwilling to pay for merit good or public goods i.e. health, education Demerit goods are really cheap, they are goods which are over consumed such as alcohol or cigarettes. Inequality of power in the market – the well off are in a position to pay high prices and so goods are produced to satisfy their needs...
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...Economic Systems (Brief Descriptions) Command System A command or “planned” economy is an economic system where economic decisions are made by a centralized planner (usually the government). The centralized planner(s) determine what types of goods and services to produce, the amount to produce, the prices and where to distribute them. The government (or the centralized planner) also owns the land, factories, and machines and decides how the goods and services will be produced. The government decides who will work where, and what machines and raw materials will be available to them. Finally, by establishing the pay and benefits available, it also decides for whom the goods and services will be produced. Through this system, a fairer distribution of income may be achieved, unemployment reduced/eliminated, and the assurance of production of socially useful products. However, unpopular decisions about the future may be made, unrealistic/ inaccurate estimates may be made thus resulting in over production or underproduction of certain items in the market. Market System A market economy relies heavily upon the market forces to determine the prices and quantities of goods, and the allocation of goods and resources. The higher the demand for certain goods, the higher the prices will be. Businesses will produce/supply the goods and services that are in demand because they are motivated by profits. What to produce is determined by the dollar votes of consumers. How to produce is determined...
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...Command Economic System: When we talk about the term “command” in historical context; whether it relates to economic, political or warfare, command has always been vested in the hands of the few. If we relate “these few” to a group of people who exercise power in terms of making decisions (be it economic/social/political etc) for ALL the people they govern, we call this process or system a “Government”. In a command economic system, this government basically owns and controls most of the economic resources of the country. This “Command” economic system is also known as “socialism” or “communism” (McConnell – Economics) In any economic system decisions have to be made regarding production of goods and services, price setting, education, expenditure on infrastructure, resource allocation, resource/property ownership, resource distribution, establishment of industries and businesses, salaries for individuals etc. In a Command Economic System, all these decisions are taken by the Centre/Government. Public in general/ individuals in general do not have any “say” in such government decisions. Practically speaking, “Absolute” command economy doesn’t exist in this world, even near perfect “command economy” of Soviet Union/Russia had private/market influences in its system. McConnell states North Korea and Cuba as near to perfect Command Economic Systems. Pakistan too took a step towards socialism/nationalization in Zulfiqar Ali Bhutto’s era in 1970s, which later had to be discontinued...
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...ECONOMIC SYSTEMS Assignment by: Fatima Amjad 0050 Elaf Anwar 0078 Sania Raza 0086 Introduction: Economic systems are the means by which countries and governments distribute resources and trade goods and services. An economic system must define what to produce, how to produce it and for whom to produced it. They are used to control the five factors of production, including labor, capital, entrepreneurs, physical resources and information resources. Different economic systems view the use of these factors in different ways. The world's economic systems fall into one of three main categories: market economy, command economy and mixed economy; however, there are unlimited variations of each type. MARKET ECONOMY: Market economy is also known as capitalism or the private enterprise system. The central thought of this system is that it should be the producers and consumers who decide how to utilise the resources. It is a system of society wide coordination of human activities, without central command. Thus, the market forces decide what to produce, how much to produce and for whom to produce. The efficient working of a free market economy requires that the producer firms must have incentives to work hard and produce goods and services at the lowest possible cost per unit of output. Market economies provide incentives to the firms and individuals by recognising and enforcing the property rights...
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...Lindolfo Lazareth Mireles III AP Macroeconomics – 1B Mr. W. English 2 September 2013 Traditional Economy VS Command Economy In economics we study how individuals and society seek to satisfy needs and wants through incentives, choices, and allocation of scarce resources. We know that we cannot have everything, we have to make choices. We then asked ourselves, “How will society choose between what they do and don’t have?” that’s why economic systems were created. They were created specifically to answer the three economic questions. What should we produce? How should we produce it? And Who should get it? There’s different ways we can answer these questions, it all depends on the economies goals and values. The first type of economy I will be discussing is Traditional economy. This type of economy is found in rural, underdeveloped countries such as Vanuatu, Pygmies of Congo, Eskimos, Indian tribes and Belarus. Which are all very small groups. In this kind of economy customs govern the economic decisions that are made, so they do things based on the ways they’ve always done them. The advantages of this economic system are that people have very specific roles, they have a sense of security in the way things are done. Men and women usually have very defined roles, usually very gender specific. There’s no question on what you’re going to do or how you’re going to do it, you will do it the way that they’ve always been done. The disadvantages are that there is absolutely no technology...
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...Types of Economic Systems. Socialism Socialist economic systems (all of which feature common ownership of the means of production) can be subdivided by their coordinating mechanism (planning and markets) into planned socialist and market socialist systems. Additionally, socialism can be divided based on the ownership of the means of production into those that are based on public ownership, worker or consumer cooperatives and common ownership (i.e., non-ownership). Communism is a hypothetical stage of Socialist development articulated by Marx as "second stage Socialism" in Critique of the Gotha Program, whereby economic output is distributed based on need and not simply on the basis of labor contribution. The primary concern for socialist planned economies is to coordinate production to directly perceived satisfy human needs/economic demand (as opposed to generate profit and satisfy needs as a byproduct of pursuing profit), to advance the productive forces of the economy while being immune to the perceived systemic inefficiencies (cyclical processes) and crisis of overproduction so that production would be subject to the needs of society as opposed to being ordered around "capital accumulation".[7][8] Capitalism Capitalism generally features the private ownership of the means of production (capital), and a market economy for coordination. Corporate capitalism refers to a capitalist marketplace characterized by the dominance of hierarchical, bureaucratic corporations. Mercantilism...
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...Economy systems and their impact It is possible to argue this in two ways. It is possible to say that a market economy would handle this situation best, but it is also possible to say that a command economy (the more socialist the better) would be more efficient. But local citizens, fire departments, police, or anyone who is in the immediate area and also the local government are the first to respond. They help to search for living people and try to rescue and aid as many victims as possible. National non-profit organizations like the Red Cross and other Non Government Organizations (NGO’s) are normally on the scene relatively quickly to try to ease the suffering and aid in the humanitarian causes of searching for survivors. However, it is also possible to argue that a market economy is the best system for dealing with disaster. The argument here is that governments simply do not work efficiently, regardless of how much power they have. The various people in government do not have much of an incentive to work their hardest to make the recovery happen. By contrast, firms in a market economy would have a motive (the profit motive) to work quickly and efficiently. They would also tend to have the expertise needed to accomplish the task. This is, for example, why some people argue that large stores like Wal-Mart, Lowe’s, and Home Depot were better able to get supplies to places that were hit by Hurricane Sandy than the government was. But I would rather go with Socialism...
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...The Islamic Economic System and Socialism The last 500 years, Islam could not be brought in the public affairs of social, political and economic domain and remained in the religion sphere, the foundation of Muslim’s getting in troubled water and finding no way out to reach to its shore. In the absence of Islamic economic system, the West – devoid from the moral and spiritual foundation- has taken over to steer the world economy. That is resulting in unprecedented human misery to the world economy starting from economic derailment to collapse economic system of many world giants flexing economic muscle. The felt need is to touch the facts lurking below the surface of the present economic order - source of unforgettable human suffering across the world, resulting even losing of human lives. Lacs of jobs are curtailed and people are getting jobless and find no social and economic patronage. Companies are being bailed by the public paid taxes to protect existence of multi nationals with the common people’s hard earned money. Even the economists are not sure the depth of deficiency and how long it will take come on track. Islam puts a different economic system which categorically forbids charging the interests for loans. The Quran says, “The interest which imposes seeking to increase your health will not bring about any increase in sight of God. Rather it is zakat which you pay for the sake of God alone, that brings about such increase of your fortune”. The Quran advocates...
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...planned economic system is best suited. In a planned economic system the government controls the allocation of resources and limits freedom of choice in order to accomplish government goals (Bovee & Thill, 2014). The government will have a group of organizations already prepared for a crisis of epic proportions and expect no profit to be made. On January 12, 2010 an earthquake struck Haiti. The quake flattened houses, hotels, and government buildings, including the National Palace and UN headquarters (Smith, 2010). I remember watching the news on TV and seeing what was left of Haiti. The next day the president of the United States Barrack Obama was on television telling everybody that he had the situation under control. Obama comes from a mixed capitalism. When he heard of the earthquake in Haiti he probably thought, this is my chance to help save millions of lives and make money. A month into the disaster, the U.S. and UN were managing to feed only 1 million people, leaving more than a million people without relief aid. Instead of mobilizing to provide water, food, and housing for the victims, the U.S. focused on occupying the country with 20,000 U.S. troops and surrounding it with a flotilla of U.S. Navy and Coast Guard ships (Smith, 2010). In my opinion Obama did everything he said he will do, but with a price. I’m sure he helped a lot of people, but just not as many as he should of. After all Barack Obama is a capitalist and in a capitalist system only those...
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...Economic Systems: Which is the Best and How is the Public Effected by the Cost Intro into Business and Technology DeVry University Economic Systems: Which is the Best and How is the Public Effected by the Cost In our textbook, Bovee and Thill (2012) define economics as the study of how a society uses it scarce resources to produce and distribute goods and services. Within economics, you can find economic systems and how they work for society. A variety of economic systems exist around the world. Each system is defined by the policies of a particular society’s structure. The best system for a society is based upon the necessary core principles that fulfill the needs of said society. The three major systems are communism, socialism, and capitalism. So let’s answer three questions about economics and its systems. Which economic system is best suited for handling a crisis of epic proportions and why? Why might a socialist system be the best in responding to the needs of people struck by an emergency situation? Why is the cost to heat our homes and businesses higher in the winter season? Socialism is arguably the best suited economic system for handling a crisis of epic proportions such as a hurricane, flood, blizzard, etc. Socialism can be defined as an economic system consisting of socially owned production used for the needs of the society’s citizens and does not include generating profits. It is true that all economic systems have their strengths and weakness relating...
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...Chapter 2 - The U.S. Economic System 1. Principles of the U.S. Economic System (p. 25-27) the economic system of the United States is known as capitalism. Capitalism is founded on certain principles, they are listed below; (16 points) a. Free enterprise: Free enterprise is an economic system that provides individuals the opportunity to make their own economic decisions, free of government constraints, and as private profit-potential businesses. The system allows for the privilege of individual ownership of property and the means of production. b. Private property: Having the right to private property means allowing individuals to own property and use it in any lawful manner they choose. In this U.S. economic system, people’s right to buy and sell private property is guaranteed by law. c. Profit motive: Economists describe the willingness of entrepreneurs to risk financial loss by organizing and launching a business enterprise as the profit motive. Profits are what remain after the expense of doing business is subtracted from a firm’s income. Business firms try hard to keep costs down and increase their income from sales. The better they succeed at this, the higher are their profits. d. Consumer sovereignty: In the end, it is the customers, or consumers, who determine whether any business succeeds or fails. Consumers are said to have sovereignty- the power or freedom to have final say. Consumers are free to spend their money for Product X or...
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...An economic system is an organized approach to producing and distributing goods and services. It is an organize way to answer the three economic questions of what, how and to whom to produce. Although every country must have an economic system to answer these three economic questions, their method of producing and distributing largely depends on the country’s historical experience, form of government, objectives and ideologies. To some people, government intervention in the economy are consider significant to protect against the worst elements of capitalism while others thing that such regulations are unnecessary invasions of their freedoms. To what extend should the government get involve in the economy. The government should take a limited role in the economy while allowing private enterprises because such involvement would eliminate the negative aspects of capitalism while adopting the positiveness of Socialism. This would benefits the economy in variety of ways. Firstly, government regulations allow businesses to remain in the private hands while removing some of the worst abuses of pure capitalism. Secondly, a government intervention protects the consumers, producers, and the community as a whole. Finally, limited government involvement prevents crises such as inflation, unemployment and depression. The nineteenth century period was a memorable period in the history of human kind. The industrial Revolution transformed society from an agricultural to a mechanized society...
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...(a) Using the production possibility curve, explain the concepts of scarcity, choice and opportunity cost. [10] (a) The concepts of scarcity, choice and opportunity cost can be explained with reference to the production possibility curve. Scarcity leads to choice and choice leads to opportunity cost. Although factor inputs are finite, human wants are infinite which leads to the problem of scarcity. Scarcity is the situation where finite factor inputs are insufficient to produce goods and services to satisfy infinite human wants. Scarcity necessitates choice. In other words, due to scarcity, society must choose what goods and services to produce. The opportunity cost of a course of action is the benefit forgone by not choosing its next best alternative. When a choice is made, an opportunity cost is incurred. In other words, when society chooses what goods and services to produce, it is choosing what goods and services not to produce. The production possibility curve (PPC) reflects scarcity, choice and opportunity cost. Suppose that there are only two goods produced in the economy. The PPC shows all the different combinations of the two goods that can be produced in the economy when factor inputs are fully and efficiently employed, given the state of the technology. The above diagram is the PPC. Although the points inside and on the PPC are attainable, the points outside the PPC are not. Scarcity is reflected by the unattainable points that lie outside the PPC, such as point...
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