Question

(1) Provide an overview of economic systems. Mention the names of some countries where specific economic systems have been adopted.

(2) Discuss the most essential characteristics of each economic system.

(3) For each of the economic systems, reflect on its advantages and disadvantages (with respect to other economic systems).

Answer 1

1} An economic system is a system which government of any societies organize and distribute the available scarce resources across the border of the country. This system will regulate the factors of production which include the land, capital, physical resources and entrepreneurs. This encompasses several institutions, agencies and other entities. There are different economic systems in the economy having different kind of features.
There are four major economic systems which countries used;
Traditional economic system: Maasai tribe of East Africa.
Command economic system: USSR
Market economic system: US
Mixed economic system: France

Ans 2} Characteristics of economic system-

1.Traditional Economic system: It is the most traditional form. The surplus would be rare in this system.

2.Command Economic system: most of the economic activities were controlled by the central government. Create healthy supply of the resources. The government tried to create enough jobs and provide goods and services.

3.Market Economic system: There is no government intervention and the firms and all other economic agents tried to attain high level profits.
4.Mixed Economic system; combination of different economic systems. Most of the market is free from government control exception for some.

Ans 3} Advantages and disadvantages of economic systems
Traditional economy: it centres on the family and allows the movement and freedom. This traditional economy produces only what they require. It is also based on the barter system. One of the most important disadvantages of the traditional economy is high level competition. It must be devastated by the natural events. There is a high risk for infectious disease. It may be devastating the environment.
Command economic system: the government mobilize the resources on massive scale. Government focus on goods for society than individual. It is hard to provide the central planners to everyone. There is also a lack of innovation.
Market economic system: Business only focuses on profitable goods. There is a high level incentive for entrepreneurship. There is also high efficiency in the use of factors of production. There is also higher income inequality occurred in the economy due to the lack of focus on societal benefits. Consumers were exploited by the monopolies.
Mixed Economic system: Private business becomes more efficient. The government intervene in correct market failure. There is negative externality of the consumption in the market for certain goods. The subsidies by the government lead to the high level debt of the industries.