Question

Individual assignment

the question:

a. Compare the three economic systems in their treatment of the economic problem and the method of solving it in each of them.

b.Think, analyze and work your critical mind and explore the most important types of price elasticity of demand, with an indication of the graph for each type with an indication of the elastic modulus

command, market, and mixed.

Answer 1

Solution: (A)

Meaning of Economic System:

An economic system is a means by which societies or governments organize and distribute available resources, services, and goods across a geographic region or country. Economic systems regulate the factors of production, including land, capital, and labour.

The three types of Economic system:

The three major economic systems are: command, market, and mixed.

Command Economic System: In a command economic system, a large part of the economic system is controlled by a centralized power. In a command economy, it is theoretically possible for the government to create enough jobs and provide goods and services at an affordable rate. A command economy is capable of creating a healthy supply of its resources, and it rewards its people with affordable prices. This capability also means that the government usually owns all the critical industries like utilities, aviation, and railroad.

Market Economic System: In Free Market Economic System firms and households act in self-interest to determine how resources get allocated, what goods get produced and who buys the goods. In this type of economy, there is a separation between the government and the market. This separation prevents the government from becoming too powerful and keeps their interests aligned with that of the markets.

Mixed Economic System: This economic system is a cross between a market economy and command economy. The market is more or less free of government ownership except for a few key areas like transportation or sensitive industries like defense and railroad, however, the government is also usually involved in the regulation of private businesses.

Solution (B)

Price Elasticity of Demand:

Price elasticity of demand is an economic measure of the change in the quantity demanded or purchased of a product in relation to its price change.

Price Elasticity of Demand =     % Change in Quantity Demanded

% Change in Price

Types of Prices Elasticity of Demand:

1. Perfectly Elastic Demand

2. Perfectly Inelastic Demand

3. Relatively Elastic Demand

4. Relatively Inelastic Demand

5. Unitary Elastic Demand

1. Perfectly Elastic Demand: In perfectly elastic demand, a small rise in price results in fall in demand to zero, while a small fall in price causes increase in demand to infinity.

1. Perfectly Inelastic Demand: A perfectly inelastic demand is one when there is no change produced in the demand of a product with change in its price.

1. Relatively Elastic Demand: Relatively elastic demand refers to the demand when the proportionate change produced in demand is greater than the proportionate change in price of a product.

4. Relatively Inelastic Demand: Relatively inelastic demand is one when the     percentage change produced in demand is less than the percentage change in the price of a product.

5. Unitary Elastic Demand: When the proportionate change in demand produces the same change in the price of the product, the demand is referred as unitary elastic demand.