Class, As stated in this week\'s lecture, economic systems differ in who owns th
ID: 1193800 • Letter: C
Question
Class,
As stated in this week's lecture, economic systems differ in who owns the factors of production and the method used to motivate, coordinate, and direct economic activities, as well as how they answer the questions of what to produce, how to produce, and for whom to produce.
What are these economic systems? What are factors of production? What kind of an economic system do we have in the U.S.A.?
Please share your thoughts. Thank you.
Class,
As stated in this week's lecture, economic systems differ in who owns the factors of production and the method used to motivate, coordinate, and direct economic activities, as well as how they answer the questions of what to produce, how to produce, and for whom to produce.
What are these economic systems? What are factors of production? What kind of an economic system do we have in the U.S.A.?
Please share your thoughts. Thank you.
Explanation / Answer
An economic system is a system of production and exchange of goods and services as well as allocation of resources in a society. It includes the combination of the various institutions, agencies, entities (or even sectors as described by some authors) and consumers that comprise the economic structure of a given community. Economists generally recognize four basic types of economic systems—traditional, command, market, and mixed.
Traditional System :
A traditional economic system is shaped by tradition. The work that people do, the goods and services they provide, how they use and exchange resources, all tend to follow long-established patterns. These economic systems are not very dynamic—things don’t change very much. Standards of living are static; individuals don’t enjoy much financial or occupational mobility. But economic behaviors and relationships are predictable. You know what you are supposed to do, who you trade with, and what to expect from others.
In many traditional economies, community interests take precedence over the individual. Individuals may be expected to combine their efforts and share equally in the proceeds of their labor. In other traditional economies, some sort of private property is respected, but it is restrained by a strong set of obligations that individuals owe to their community. Today you can find traditional economic systems at work among Australian aborigines and some isolated tribes in the Amazon.
n a command economic system or planned economy, the government controls the economy. The state decides how to use and distribute resources. The government regulates prices and wages; it may even determine what sorts of work individuals do. Socialism is a type of command economic system. Historically, the government has assumed varying degrees of control over the economy in socialist countries. In some, only major industries have been subjected to government management; in others, the government has exercised far more extensive control over the economy.The classic (failed) example of a command economy was the communist Soviet Union
In market economies, economic decisions are made by individuals. The unfettered interaction of individuals and companies in the marketplace determines how resources are allocated and goods are distributed. Individuals choose how to invest their personal resources—what training to pursue, what jobs to take, what goods or services to produce. And individuals decide what to consume. Within a pure market economy the government is entirely absent from economic affairs.
A mixed economic system combines elements of the market and command economy. Many economic decisions are made in the market by individuals. But the government also plays a role in the allocation and distribution of resources.
The Factors of Production is an economic term to describe the inputs that are used in the production of goods or services in the attempt to make an economic profit. The factors of production include land, labor, capital and entrepreneurship.
The United States has a mixed economy. It is a combination of a free market economy and a command economy. Compared with most other countries around the world, it is more towards a free market economy and less towards a command economy. In most ways, the US has a market economy. People can pretty much do what they want to do economically -- they can go into whatever business they want, make whatever they want, etc. But there are aspects of a command economy. There is a minimum wage, for example. Also, there are environmental rules and safety rules and other such things. On the whole, though, the US is pretty much of a free market economy.