Question

Assignment- [ A4]:  For this assignment you need to answer all the questions:

Every productive activity involves some combination of different categories of scarce resource. Think of your OWN business proposed to start in 2021.

Q1. Which among the following economic system would easily overcome the economic crisis that caused during Covid 19 pandemic?                

a.     Capitalist economy

b.     Socialist economy

c.     Mixed economy

You are required to build and justify three arguments in favor and against of the selected economic system.                             (6+6 Marks)

Q2. According to you which among these economic systems would be highly affected by pandemic? Justify.                              

Guidelines:

1.     Show a thorough understanding of the purpose of the activity.        2. Display knowledge of the major practices involved and an ability

to apply them effectively.         3. Provide evidence of wide reading, including academic journals.   4.  Demonstrate an ability to select critical points, evaluate them and communicate the conclusions effectively.    5. Provide approaches that are creative, practicable, and supported.   

Answer 1

Answer 1. c. Mixed economy will easily overcome economic crisis caused by covid 19 pandemic.

argument in favor in mixed mixed economy:

• Market economy combines the effort of private organisation and government.
• Private organisation bring use capitals in the economy. Huge investment in the economy helps it to overcome market failure.
• Government regulates the activities of private organisation and make sure that customers are not exploited and good quality services and goods are brought in the market.

Arguments against mixed economy:

• In mixed economy sometimes government take full control of the market and private organisations are left with less control and power.
• In mixed economy there is high level of corruption.
• Wealth is not equally distributed in a mixed economy and a gap remains between rich and the poor.

Answer 2. Capitalist economy is highly affected by pandemic. This is because in capitalist economy only private organisations operate in the market. The damages caused by pandemic can only be corrected with the help of government policies such as monetary policy and fiscal policy. Private Enterprises does not have any control on this policies and cannot correct the failures caused by pandemic. Therefore capitalist economy will be highly affected by pandemic and may result in permanent market failure. In order to correct market failure caused by the pandemic government intervention is highly recommended because government can increase and decrease money supply in the economy with the help of Central Bank.