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Introduction to Economic - Essay Example

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Running head: Introduction to Economics Introduction to Economics Insert Name Insert Grade Course Insert 8 March 2012 Introduction to Economics Introduction The mixed economy is an economic system that basically relies on both governments and free markets to allocate resources to the whole economy…
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Download file to see previous pages All economies in the real world depend on a mixture of both governments and markets to allocation resources efficiently. According to markets, resources are allocated through voluntary choices that are made by all participants in the economy and individuals. On the other hand, governments allocate resources involuntarily and enforce laws, taxation systems, regulations, and restrictions to participants. Question 1 Market and Government Economies Countries may have preferences between the using of governments or markets in allocating resources within their economies; however, it is evident that both markets and governments play an important role in mixed economies. Markets generally involve exchange of goods and services in a manner that is voluntary, since no force used to compel any economic participant in buying or selling items of economic value. A market basically thrives on participants’ willingness and desire to exchange. Pure market economies exclusively use markets to allocate and distribute resources throughout the economy. Government economies rely on involuntary enforcement to allocate resources through setting of rules and laws to govern a resource allocation system. The rules and laws are mandatory for participants in the economy, and the government has the right to enforce the laws and punish participants who fail to agree with the generally accepted rules and regulations. Participants in the economy follow resource allocation rules and regulations because the government and relevant authorities enforce them. Pure command economies use governments exclusively to allocate resources in their economies. However, such kind of economies precludes theoretical extremes, since they do not actually exist and are not realistic with regards to the real world situation. Both pure market and pure command economies provide a benchmark to facilitate real world economic aspects comparison. Mixed economies are therefore evident in the real world, since both pure market and pure command economies preclude non-existent theoretical ideals, leaving the real world economies somewhere in between the two theoretical ideals. Although the theoretical ideals are non-existent in the real world, their collective contributions are evident in mixed kind of economies. It is important to note that, although mixed economies use both markets and governments to allocate resources, real world mixed economies use more of governments or markets, in accordance to the systems they use. This alludes to economies such as capitalism, which is an economic system that is market oriented, as it uses more of market than government in allocating resources. Similarly, communism and socialism are mixed economies that use more of governments than markets to allocate resources (Greene, 2007, p.46). Mixed economies use government policies, rules, and regulations as an inherent dimension used to pursue economic goals in allocation of resources. Economic goals pursued encompass societal desires such as the need to achieve full employment, equity, stability of the economy, economic efficiency, and sustainable growth. Through economic policies, governments assume the primary responsibility of pursuing economic goals desired by the economy through assisting, controlling, guiding, and regulating the voluntary market. Government policies are undertaken in form of ...Download file to see next pagesRead More
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