Economic systems

Economics Research Paper


An Economic system Is the Organized way in which a state or nation allocates its resources and apportions goods and services in the national community.(businessdictionary.com)
There Are Three Major Types of Economic Systems
-Market Economy
In a market economy, national and state governments play a minor role. Instead, consumers and their buying decisions drivethe economy. In this type of economic system, the assumptions of the market play a major role in deciding the right path for a country’s economic development. (Economywatch)
Market economies aim toreduce or eliminate entirely subsidies for a particular industry, the pre-determination of prices for different commodities, and the amount of regulation controlling different industrial sectors.(Economywatch)
In Market Economy the ability to compete depends on successful coordination. (Shapiro, 1996)
The absence of central planning is one of the major features of this economic system. Marketdecisions are mainly dominated by supply and demand. The role of the government in a market economy is to simply make sure that the market is stable enough to carry out its economic activities properly.(Economywatch)
When businesses compete in the market, customers pay less, workers find more jobs and receive higher pay, and businesses owners receive a higher return on their invested savings.(Shapiro, 1996)
-Planned Economy
A planned economy is also sometimes called a command economy. The most important aspect of this type of economy is that all major decisions related to the production,distribution, commodity and service prices, are all made by the government. (Economywatch)
The planned economy is government directed, and market forces have very little say in such an economy. Thistype of economy lacks the kind of flexibility that is present a market economy, and because of this, the planned economy reacts slower to changes in consumer needs and fluctuating patterns of supply...