Economic Systems
ECONOMIC SYSTEMS
There are a variety of economic systems operating in the world. These can be categorized into planned economies, market economies and a combination of the two, mixed economies. Two key features distinguish economic systems: who owns the land and capital, and who decides what is produced.
THE QUESTIONS FACING ALL ECONOMIES
All societies face three fundamental questions and how these are answered will depend on the type of economic system being operated. These questions are as follows.
WHICH GOODS AND SERVICES SHALL BE PRODUCED AND IN WHAT
QUANTITI ES?:-
This problem concerns the composition of total output. The community must decide which goods and services it is going to produce and hence which goods and services it is not going to produce. Having decided the range of goods and services to be produced, the society must then decide how much of each good and service should be produced. In reality the choices open to a society are rarely of the all or nothing variety. They usually take the form of more of one thing and less of another the first and major function of any economic system is to determine in some way the actual quantities and varieties of goods and services that will best meet the wants of its citizens.
HOW SHOULD THE VARIOUS GOODS AND SERVICES BE PRODUCED?
Most goods and services can be produced by a variety of methods. Wheat can be grown by making use of much labor and little capital, or by using large amounts of capital and very little labor Electrical appliances can be made by using large and complex machines operated by relatively few semi- or unskilled workers. Alternatively they might be produced in hosts of small workshops by highly skilled technicians using relatively little machinery. Different methods of production can be distinguished from one another by the differences in the quantities of resources used in producing them....
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