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Business Environment - Coursework Example

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An economic system, best described as an organizational network that a society uses to resolve the basic problem in determining for who, what, and whom to produce (Kurtz and Boone, 2008:14). In this section, this paper will discuss at least economic systems and their effect on allocation of scarce resources…
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Download file to see previous pages There are several types of economic systems but this paper will only concentrate on theses three namely, planned economy, participatory economy, and barter economy. In planned economy such as state socialism where the economy behaves like a hands on economy in which people follow the state laws of economy. In participatory economy, people guide the production and distribution of goods through participating in the system. While in barter trade, traders exchange goods for other goods directly. These three economic systems attempt to allocate resources effectively by helping in making decisions regarding how, what, and for whom to produce (Gitman and McDaniel, 2008:101). For instance, in planned economic system, the state owns the scarce resources whereby it allocates them to the public by setting up production targets and rate of growth according to how it views the public’s wants. In this system, the overall income and distribution of wealth falls in the hands of the state authorities. As such, the amount of resources an individual can access depends on his income and the resource depends on the value of market. Barter economic system entails of exchanging goods for other goods. In this case, these economic systems allocate resources effectively and accordingly depending on need and availability.
Factors of production
Factors of production contribute to scarcity of production in that, the more people produce, the more they are utilizing the available resources. Scarcity takes place following the inadequate availability of resources in spite of the fact that people require resources to produce. Factors of production include the natural resources such as land, water, air, and minerals among others. There is labor, which entails about the human effort used during production of goods whereby it involves marketing expertise and technical skills. There is also capital stock whereby these are human made goods or means of production in which people use them to produce other goods (Kurtz and Boone, 2009:52). With this sense, factors of production such as land contribute towards scarcity of resources since it is a natural resource and humans cannot control that by structuring another land upon using the first one. It is available, but has no alteration or effort on the part of humans. Out of the three economic systems listed above, I think the most appropriate one is the planned system of economy. This is because, planned system of economy bases on the process of accumulating capital. Simultaneously, it also seeks to direct or control the process of accumulating capital via corporative ownership or state ownership. By so doing, this economic system ensures stability and encourages equality among different people as well as expanding the power of decision-making (Kurtz and Boone, 2009:69). In addition, with planned system of an economy, the public, the state, and corporative all carry out production with view of attaining maximum profits. In this system, the market players are responsible for making decisions concerning investment and as such, they are able to assess which means of production are competent in the market. As a result, this system of economy is appropriate since it coordinates production directly to satisfy the economic ...Download file to see next pagesRead More
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