Economies: Similarities and Differences
Economics is the study of the economic problem; how to satisfy unlimited wants with finite resources? Individuals, businesses, and governments must all make conscious, rational decisions as to how these wants are fulfilled, and what the implications of these choices are – primarily those of opportunity cost and allocative efficiency . Economies aim to achieve a sustainable balance between immediate utility of wants, and the continuation of growth and gratification into the future.
Market and Planned Economies
Methods of approaching and solving the economic problem have evolved over time as economic organisation becomes continually more sophisticated and efficient. Generally speaking there are two polarised …show more content…
Resource allocation and availability is privately controlled, with minimal interference by government administration – businesses and individuals are free to accumulate income and wealth and are allowed to hold private property. This operation can be summarised as laissez faire – basically meaning economic liberty. Such countries as the USA, Australia, and Switzerland operate as market economies – with widespread private ownership; however, it must be accounted for that no economy can exist as a complete free market.
Governments must have some hand in regulation on a social and ethical basis, as well as provide a mild level of affluence to the population in the form of collective wants, like public education, transport, defence, and welfare; this is because these areas are not fairly profitable and therefore not a viable business option to feasibly profit from in a market system. In this way market economies do include governments as regulatory bodies and medium to provide communal necessities.
Planned …show more content…
The main problem of course is that there is no precedent framework for these countries to expand and deregulate such centralised organisation without corruption and the continuity of government pressure on free enterprise. In this way command systems often experience attempts to break free of government constriction on consumer choice and economic decision.
The divide between market and planned economies in regard to economic freedom is demonstrated in the graph below; with Australia, USA, and Switzerland compared to Cuba and North Korea. Higher scores translate to higher overall economic freedom in the country specified, and the opposite for low scores.
Functions of an Economic
Economics is the study of the economic problem; how to satisfy unlimited wants with finite resources? Individuals, businesses, and governments must all make conscious, rational decisions as to how these wants are fulfilled, and what the implications of these choices are – primarily those of opportunity cost and allocative efficiency . Economies aim to achieve a sustainable balance between immediate utility of wants, and the continuation of growth and gratification into the future.
Market and Planned Economies
Methods of approaching and solving the economic problem have evolved over time as economic organisation becomes continually more sophisticated and efficient. Generally speaking there are two polarised …show more content…
Resource allocation and availability is privately controlled, with minimal interference by government administration – businesses and individuals are free to accumulate income and wealth and are allowed to hold private property. This operation can be summarised as laissez faire – basically meaning economic liberty. Such countries as the USA, Australia, and Switzerland operate as market economies – with widespread private ownership; however, it must be accounted for that no economy can exist as a complete free market.
Governments must have some hand in regulation on a social and ethical basis, as well as provide a mild level of affluence to the population in the form of collective wants, like public education, transport, defence, and welfare; this is because these areas are not fairly profitable and therefore not a viable business option to feasibly profit from in a market system. In this way market economies do include governments as regulatory bodies and medium to provide communal necessities.
Planned …show more content…
The main problem of course is that there is no precedent framework for these countries to expand and deregulate such centralised organisation without corruption and the continuity of government pressure on free enterprise. In this way command systems often experience attempts to break free of government constriction on consumer choice and economic decision.
The divide between market and planned economies in regard to economic freedom is demonstrated in the graph below; with Australia, USA, and Switzerland compared to Cuba and North Korea. Higher scores translate to higher overall economic freedom in the country specified, and the opposite for low scores.
Functions of an Economic