Presentation On Economic System Presented By:-

(NR 16118)Rujal Patel(NR 16069)Milan Kagarana

Pooja Thakkar(NR 16015)Dipak Bhavsar

Harsh Shah

Economics - Economics is the social science that analyzes the production, distribution and consumption of goods & services.

Economic System is the system of production, distribution and consumption

An economic system is a mechanism (also defined as system or social institution) which deals with the production, distribution and consumption of goods and services in a particular society.

The economic system is composed of people, institutions and their relationships. It addresses the problems of economics like the allocation of the resources.

An organized way in which a state or nation allocates its resources and distributes goods and services in the national community.

Types:

Capitalism (Market Economy)

Socialism (Planned economy)

Mixed (Capitalism + Socialism)

• Capitalism is an economic system in which the means of production are privately owned and operated for profit, usually in competitive markets.

• In other words; An economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations.

• ADAM SMITH (FATHER OF ECONOMICS)• (Book: Wealth of Nations).

Subject to certain restrictions, individuals (alone or with others) are free to decide where to invest, what to produce or sell, and what prices to charge. There is no natural limit to the range of their efforts in terms of assets, sales, and profits; or the number of customers, employees, and investors; or whether they operate in local, regional, national, or international markets.

• Centralized to Decentralized system

• Authoritarianism to representative democracy

• Free flow of resources

• People strive for self interest in free market

• Beneficial for society

• Based on Demand & Supply Forces

• Monopoly to Competitiveness

• Self sufficiency to International interdependence

• Producer interest to customer power

United States Canada United Kingdom Australia Japan Austria Ireland Sweden Switzerland Israel

Americans are known to be risk takers and capital makers. In the US it is possible to begin a business of humble means and expand it to grow into a conglomerate business model for people wanting to start a new business.

Capitalism allows private ownership to spur production of goods and allows the private owner to keep and track profits for what sells.

In years 1000–1820 world economy grew six-fold, in years 1820–1998 world economy grew 50-fold

Provides Choice to customers Provides valuable goods and services Capitalism actively rewards positive traits like hard work Similarly, it punishes negative traits such as laziness and

theft Narrows the gap between common person and wealthy Provides opportunity to realize dreams and desires Capitalist societies usually do not have large black markets Build on democracy Social Good

Downfall of work ethics Free Market + Self Interest Accumulation of wealth Encourages inequality in a

society Business lobbying with

government Monopolistic tendency Human resource exploitation Results in great disparities

between income of people owning the capital resources and others

Collective ownership and democratic control of the material means of production by the workers and the people

Socialism is a term applied to an economic system in which property is held in common and not individually, and relationships are governed by a political hierarchy. Common ownership doesn't mean decisions are made collectively, however. Instead, individuals in positions of authority make decisions in the name of the collective group.

Socialists argue that socialism would allow for wealth to be distributed based on how much one contributes to society, as opposed to how much capital one holds.

A primary goal of socialism is social equality and a distribution of Wealth based on one’s contribution to society and an economic arrangement that would serve the interests of society as a whole.

Socialism as we know it today, most commonly refers to "market socialism," which involves individual market exchanges organized by collective planning.

Difference between socialism and communism is that communists directly oppose the concept of capitalism, an economic system in which production is controlled by private interests. Socialists, on the other hand, believe socialism can exist within a capitalist society.

China Denmark Finland Netherlands Canada Sweden Norway Ireland New Zealand

In China the government manages and controls the economy. Many of the domestic companies are owned and run by the government. Recently, the Chinese economy has become more geared towards capitalism, but is still officially socialist. Life in China remains relatively less stressful and more relaxed than life in capitalist countries like America.

• Social Ownership of means of production• Existence of public sector• Decisive role of Economic Planning• Production guided by Social Benefits• Abolition of exploitation of labour

i. Better salariesii. Stable Environmentiii. Eliminates povertyiv. Better Productsv. Fulfills survival needvi. Opportunity for

citizens to explore non-economically-productive pursuits

Distorted price signals Suppression of economic

democracy Slow Technological

advancements Minimize self

management Reduced incentives

BASIS OF DIFFERENCE

CAPITALIST ECONOMY SOCIALIST ECONOMY

Resources Ownership

Privately owned State owned

Foundation belief competition brings out the best in people

cooperation is the best way for people to coexist

Earning of wealth everyone works for his own wealth

everyone works for wealth which is distributed equally to everyone

Market Scenario Level playing field Protection to PSUs, Private enterprises are permitted in few businesses only

Govt. interference Only in situations where laws have been broken

Fully involved

Employees motivation

Highly motivated on account of proportional benefits

Rarely motivated as performance is not rewarded

Merit Perception of better economic growth because of competition

Equal distribution of income results in welfare of all

Demerit Few individuals/groups attain powers, rest are exploited

Hard work is not rewarded, lazy employees also enjoy equal level of benefits

Any economy in which private corporate enterprises and public sector enterprises exist side-by-side, and decisions taken through market mechanism are supplemented by some form of partial planning, is to be described as a mixed economy.

This system overcomes the disadvantages of both the market and planned economic systems.

Provides a clear demarcation of the boundaries of public sector and private sector so that the core sector and strategic sectors are invariably in the public sector.

The government intervenes to prevent undue concentration of economic power, and monopolistic and restrictive trade practices

The rights of the individual are respected and protected subject only to the requirements of public law and order and morality

India Iceland France Cuba Russia Germany South Korea Hong Kong

In a mixed economy, private and public sectors go side by side. The government directs economic activity in some socially important areas of the economy, the rest being left to the price mechanism to operate.

Before Independence, Indian economy was a ‘laissez faire’ economy. But post-independence, she adopted the mixed economy system.

Thus, it is clear from the following arguments that our economy is a mixed economy.

Resources are owned both by the government as well as private individuals. i.e. co-existence of both public sector and private sector.

Market forces prevail but are closely monitored by the government.

Monopolies may be existing but under close supervision of the government.

Producers and consumer have sovereignty to choose what to produce and what to consume but production and consumption of harmful goods and services may be stopped by the government.

As compared to Market economy, a mixed economy may have less income inequality due to the role played by the government.

A mixed economy represents an achievable balance between individual initiative and social goals.

One disadvantage of mixed economies is that they tend to lean more toward government control and less toward individual freedoms.

While most modern forms of government are consistent with some form of mixed economy, the mixed economy is most commonly associated with social democratic parties or nations run by social democratic governments.

Some critics of contemporary social democracy argue that when social democracy abandoned Marxism it also abandoned socialism and has become, in effect, a liberal capitalist movement.

Marxian socialists argue that because social democratic programs retain the capitalist mode of production they also retain the fundamental issues of capitalism, including cyclical fluctuations, exploitation and alienation.