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Micro & Macro Economics

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KINDS OF ECONOMIC SYSTEM Command Economy

Market Economy

Mixed Economy

EconomicSystems

MixedEconomy

MarketEconomy

CommandEconomy

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COMMAND ECONOMY The Government or central authority determines what,

how, and for whom goods and services are produced.

Examples of command economies: Cuba, NorthKorea and the Peoples Republic of China

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CHARACTERISTICS The government dictates the job in which you work

The government sets the prices of goods and services

Change can occur relatively easily

There is little individual freedom

There is no competition

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CHARACTERISTICS Businesses are not run to create a profit

Consumers have few choices in the market place

Factories are concerned with quotas

Shortages are common because of poorly run factoriesand farms

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TYPES OF COMMAND ECONOMY Strong Command Communism

Government makes all decisions

Distribution according to needs

Moderate Command Socialism

State owns major resources

Some form of private enterprise exists Distribution according to deeds

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ADVANTAGES Focus on Equality

The government tries to eliminate all private propertyand distribute its goods equally.

If done correctly no one is in poverty and no one iswealthier than another

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ADVANTAGES Emphasis on Social services

The government will provide equal health care,education opportunities, and make sure all people arefed.

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ADVANTAGES Capable of rapid change for major problems.

The government owns the companies, so if productionneeds to be shifted into a different area, the governmentis capable of doing it rather quickly.

Stability

Command economies will never have suddendepressions.

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DISADVANTAGES Very little freedom for Individuals

The individual usually doesnt have the opportunity todecide what they want to do for a career, and they haveno control over the goods they receive.

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DISADVANTAGES Lack of innovations, hard work, or quality of the work.

Since no one makes more money than everyone else, thepeople feel like there is no reason to work hard.

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DISADVANTAGES Little focus on consumer wants.

Central Authority does not provide what consumerswant

It only provides what consumers need

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MARKET ECONOMY Consumers and businesses decide what they want to

produce and purchase in the marketplace.

In recent years, market economies have been comingmore and more popular.

Three major examples of market economies are TheUnited States,Japan, and France

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CHARACTERISTICS Resources are owned and controlled by individuals

Economic decisions are made by individuals competing to

earn profits

Individual freedom is considered very important

Economic decisions are made by the basic principals ofsupply and demand

Profit is the motive for increasing work rather than quotas

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CHARACTERISTICSAlso called Capitalist Economy or Free Economy

There are many economic freedoms

There is competition among businesses

Competition determines price which increase thequality of the product

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ADVANTAGES Easily adjusted to change

If there is a demand for one thing, companies have theability to change what they produce instead of having togo through too much government protocol first.

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ADVANTAGES Rational self interest in market economies are

encouraged.

People have the ability to make as much money as theycan and do what is in their best interest.

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ADVANTAGES No involvement of Government in businesses.

Government only sets certain standards businesses mustfollow

For the most part businesses can do as they please,allowing them to produce what they want, how they

want.

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ADVANTAGES Great variety of goods and services for consumers.

If there is a demand for a good or service, the demandwill almost always be met in a market economy.

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DISADVANTAGES Does not always provide the basic needs to everyone in

the society.

The weak, sick, disabled, and old sometimes havetrouble providing for themselves and often slip intopoverty.

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DISADVANTAGESAnother problem is that it becomes hard for a

government with so many private businesses toprovide adequate defense, education, and health care

to its people.

A third disadvantage to this type of economy is that

there is uncertainty in the business world

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MIXED ECONOMY Government and individuals share the decision

making process

Government guides and regulates production of goodsand services offered

Individuals own means of production

Protects consumers and workers from unfair policies

Most effective economy for providing goods andservices

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ADVANTAGES Rapid economic development

In mixed economy both private and public sectors workside by side.

The combined efforts lead to rapid economicdevelopment.

The economic resources of the economy are usedefficiently.

Wastages of resources are minimized.

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ADVANTAGES Lesser inequality of income

Right to own property is granted.

Law of inheritance is also applied, so certain members ofsociety grow richer and richer.

Public sector in the economy tries to provide economicfacility to the general masses.

It reduces inequality of income.

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ADVANTAGES Balanced regional growth

The planning commission of the country makes policiesfor the development!"of every region of the economy.

The government tries to develop all regions and everysection of population.

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ADVANTAGES Freedom to own private property

Individuals are free to acquire property and retain intheir own names, so the initiative to work more and earn

more is there.

It helps in the rapid development of the economy in thefield of agriculture, industry and other services.

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ADVANTAGES Planned development

The planning commission is empowered to makeeffective plans for the development of the economy.

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ADVANTAGES Public interest

The public sector looks into the interest of the generalpublic.

The government under this economy is said to bewelfare state.

It introduces social insurance schemes, incursexpenditure and manages economy in the interest of

general masses of the country.

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DISADVANTAGES Fear of nationalization

Private and public sector coexists.

The government has the power to nationalize and ownany industry.

Private sector remains under a psychological fear thattheir industry may be nationalized or taken over in thepublic interest.

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DISADVANTAGES Inequality of income

Inspite of all the efforts of the government to bringequality, rich people grow richer and the inequality

prevails.

Economic resources economic developments areconcentrated with certain big industries.

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DISADVANTAGES Corruption

Corruption is the common feature of mixed economy.

Black-marketing, profiteering, dishonest dealings andcorruption is seen both at higher and lower levels.