Comparison of free market command and mixed monetary systems

A problem of every overall economy is scarcity. Scarcity is the very reason economics as a subject of study was created, for scarcity is the base or foundation of it all (the analysis of economics). Scarcity in conditions of economics can simply be defined as reference(s) being "small in source"; this is because human wants are infinite while resources are limited. Because of this resources must be allocated effectively in order to avoid wastage, this reveals a problem for economists (hence the study of economics) and brings these basic questions to the fore, namely;

What to produce

How to produce

Who to create for

These are the recommendations economists use to increase the limited resources for the unlimited desires of man. Financial systems are therefore formed using their function being to determine the allocation of resources.

IDENTIFICATION OF BASIC ECONOMIC SYSTEM

There are three basic economical systems, namely;

Free market economy

Command economy

Mixed Economy

FREE MARKET ECONOMIC SYSTEM

Its other brands include capitalist/free venture/laissez-faire overall economy.

In this financial system resources are permitted to be managed and manipulated by private home owners, private firms and individuals, these entities possess the right to compete for cost-effective gain. Since resources are manipulated in such a way the market forces; demand and offer determine source allocation as opposed to being restrained by the federal government whose only role in this financial system is to safeguard individuals and offer rights to control resources through legislation and awarding of contracts.

Features of free market market include

Individuals have the right to own resources

Price depends upon the market makes (price mechanism)

There is competition within the market

There is little if any government intervention

The laissez-faire (let-us-be) school of thought is employed

There is a usually a huge gap between the wealthy and poor

Individuals contain the to vie for economical gain

Consumers are ripe for exploitation

Price is unstable because of potential for inflation, competition and other related factors

Consumers have flexibility of choice

Large rate of technology due to competition

Social benefits e. g. medical and education are just available if it can be afforded

Freedom of choice for consumer

A good example of a country that uses free market market system is the United States of America.

COMMAND ECONOMIC SYSTEM

Its other brands include planned overall economy and controlled economy.

Command overall economy is the contrary to a free of charge market economy, it could be brand name this way because in this economical system resources are held and handled by the condition/government as no-one (individuals, private firms etc) is allowed to own resources which results in the non-existence of competition for economical gain in this economy. The state decides what to produce, how a lot of it ought to be produced (resources), which source is of all importance, the percentage of particular resources dedicated to which sector, circulation of output etc. Also in the forex market system market forces are not one factor in price willpower because the government itself makes a decision on what the price of resources should be (price regulation).

This financial system is characterized by the next

Individuals and businesses don't possess the right to own and control resources

Price regulation is utilized rather than price mechanism

This system avoids customer exploitation

There is price stability

Freedom of preference is restricted for the consumer

Minimal expertise and division of labor

There is a good chance that resources will be underutilized due to government alone determines what to be produced, creating prospect of wastage

The government tries to address desires and needs by deciding what is required.

People are generally of identical wealth

There is not a vying for cost-effective gain between individuals and firms

Officials are usually corrupt

The government owns and regulates all resources

Examples of countries that employ the command financial system are the USSR (now dissolved), Cuba and North Korea

MIXED ECONOMIC SYSTEM

The mixed economic system is something that combines free market and order economy insurance policies in a certain ratio. This implies the laissez-faire is utilized but the federal still has significant control over resources. This is actually the most realistic exemplory case of an financial system because no current economic climate is solely capitalist or command word. It is presumed that a mix of both systems can lead to the edging out of the many disadvantages that these systems independently keep. Some examples of mixed market (high amount of federal control and consumer freedom) are Britain and Nigeria.

COMPARISM WITH OTHER ECONIMIC SYSTEMS

FREE MARKET ECONOMIC SYSTEM

PLANNED ECONOMIC SYSTEM

Market causes determine price (price system)

Price depends upon the federal government (Price legislation)

Individuals and private firms have the right to own and control resources

Individuals don't have the to own and control resources

Little or no authorities intervention in monetary plan, their role is merely to safeguard individuals and regulate activities through legislation (Laissez-faire)

Government procedures oversee and control complete economy

Since folks are remaining to vie for monetary gain, competition is numerous hence the need for innovation

Innovation is effectively non-existent since the government determines what is needed

The aspect of the market creates a big gap between your abundant and poor i. e. the competitive aspect results losers sacrificing and winners winning

In this system the government eradicates competition in order to produce equality resulting thereby reducing the difference between the wealthy and poor

Extreme highs and lows in conditions of standard of living

Most people experience similar standard of living (although it is usually collectively low)

Products are usually of very good quality because of this of competition

Manufacturers haven't any incentive to improve their products since the government dictates what things to make producing a big probability of the make of below standard products

Economy is very unstable

Economy is very stable

This system dominates most economies throughout the world (around 80%)

This system is much less wide-spread covering about 20% of the worlds economies

Economic system gets country involved in international trade and ensures the best potential utilization of resources

Resources are underutilized being that they are only designed for home use, this also restricts ability to trade internationally

STRENGHTS OF Command word ECONOMIC SYSTEM

Consumer exploitation is roundly prevented

There is price stability

There is a relatively lessened gap between your abundant and poor (this is in comparison with a capitalist current economic climate)

Essential goods are provided

It offers a minimum amount standard living

It's a very stable economy

It's very flexible when confronted with a major problem as the government can react rapidly to the problem since it controls all

There are identical public services and opportunities for any such as medical, education

WEAKNESSES OF COMMAND ECONOMY

Specialization and division of labor is low

The consumer doesn't have flexibility of choice

International trade severely restricted since administration only is designed to create goods because of its own country

Underutilization and wastage of resources

Product quality is normally sub-standard

Standard of living is collectively low

Officials are usually corrupt

Innovation is virtually useless as the government determines what is required for the economy

CONCLUSION

These three examples of economic systems will be the broadest and best summarise all types of economic systems on earth. Though some systems may seem utopian when described but they are in reality for more complex in nature and bring along many disadvantages combined with the advantages they can be characterized by. Therefore economic systems are not necessarily picked based on the perception of which one is thought to is apparently better but what the concerned party hopes to achieve within their country.

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