Introduction to the Economics System - Essay Example

? Economics System Economics System The definition and types of economics systems The production, distribution, and allocation of goods and services may define an economics system. The combination of these sectors makes up the economic structure of different economies. There are four main types of economics systems, namely; the mixed economic system, market economies, command economic systems, and the traditional economic system. They ensure that the limited resources are prioritised and allocated accordingly. In a traditional economic system, society takes precedence over individual interests. Resources are shared equally and individuals work together. Australia is a region that uses this type of system, among the aboriginal communities. In the mixed economic system, most decisions are made by individuals in the market. The United States is an example of a nation that uses this system. In market economies, decisions on the economic standing of a region are made by individuals. The interaction of people and organizations determines how resources are allocated, for example, Brazil. In the command economic system, the government is in charge of the economic status of the region. The distribution and allocation of resources is determined by the state (Myers 2012, p. 83). Socialism is the perfect type of such a system, an example being Cuba. Free market economy A free market system is an economic system in which the state’s government does not interfere with businesses. The exchange of goods and services between individuals is voluntary. Different parties partake in such exchange because they aim to benefit. In this system, exchanges takes place, which may not be a simple concept as each individual may have their own perspective on the value of products or services (Ertuna 2012, p. 68). Furthermore, this system advocates for the use of money as a medium for exchange to occur. It is this medium that facilitates the exchange for another desired commodity. Features of the free market economy and the mixed economics system The free market economy is based on the demand and supply concept. This is where there is little or no regulation from parties that are not concerned with the exchange of goods and services. In this system, all means of production are done by private individuals, with profit-seeking enterprises, who control resources in their possession. All factors of production are owned privately. Mixed economic systems on the other hand have regulations that need to be followed. There are price guidelines stipulated by major parties that control the movement of goods and services in the economy (Ertuna 2012, p. 76). The basic principle that surrounds this system is that the means of production are carried out by private owners as well as government agencies. Self-interests run the objectives of free markets, but they do respond to the needs of the consumers in the market. Mixed markets have the opposite objective as they aim to give everyone; consumers, the government, and even workers, what they work for in the region. No price mechanism runs the mixed economic system as with the free market system. Things change from time to time, but it is often done for the overall good of all individuals (Cowie & Ison 2010, p. 37). The free market system advocates for prices that only benefit privately run resources in the economy, which sometimes weighs on the poorer individuals in the region. How free market economy is more effective than mixed economy The free market system is believed to be more effective than the mixed economic system because more players are involved in the economy. This is because all that is offered through a free market system comes from all around the world. The free market pricing system makes the availability of goods and services from all around the world a welcome phenomenon. Entrepreneurs and business minds are given the largest scope and opportunity to risk their capital in a bid to offer resources that satisfy the needs of consumers (Cowie & Ison 2010, p. 48). Future desires can also be monitored through the free market. The productivity in an economy is increased through free market as compared to a mixed market. This is through savings and investments that are created, which increases the standards of living among all citizens in the region. Free market systems also stimulate and rewards technological growth and development. Innovators in this field get an exceptional head-start in trying to satisfy consumers of their products. This is through innovative creations of their products that are aimed at satisfying consumers, around the world. They spearhead economic growth of their regions differently as they struggle to find a footing in the global market (Cowie & Ison 2010, p. 56). Limitations of free market against the strengths of mixed economy One of the main limitations of a free market system is the privatisation of many firms that seek to benefit their pockets at the expense of citizens. Self-interest in modern times has been the slogan for most players in the economic market. In a mixed economy, government intervention in some instances can assist the citizens of a region curtail some of the powers that individual players in the market may have. The issue of monopoly or the dominance of one organization can be reduced significantly by the government (Kates 2011, p. 98). This may be one of the biggest strengths of the mixed economy. Conclusion and recommendations The free market system is not better or more effective than the mixed economic system. Individuals should not have the autonomy to control the fate and lives of individuals who might work toward making their lives better. In such a system, the richer an individual is, the more they could purchase. It should not be left to these players to determine a region’s economic course. The mixed economic system is probably the solution that could work for economies around the world. Individuals have a right to value the products they need. Government agencies can offer protection against individual firms that are present in the market, for example; from exploitation and greed (Kates 2011, p. 112). References Chrystal, A & Lipsey, R 2011, Economics, Macmillan Publishers, London. Cowie, J & Ison, S 2010, The economics of transport: a theoretical and applied perspective, Routledge, London. Ertuna, OI 2012, Wealth welfare and the global free market: a social audit of capitalist economics, Hart Publishing, New York. Kates, S 2011, Free market economies: an introduction for the general reader, SAGE, London. Myers, D 2012, Economics and property, Bantam Books, New York. Read More