Business Environment & Economic Systems, Fiscal & Monetary Policies, Cc & Regulatory Bodies, International Trade & British Economy, Global Factors & Impact on British Organisations, Analysis & Implications Joining Eu
Task 1:
a) Explain how different economic systems attempt to allocate scarce resources. Outline the economic system of the UK.
The allocation of resources is an economic theory concerned with the discovery of how nations, companies or individuals distribute economic resources or inputs in the economic marketplace. Traditional business inputs are land, labour and capital.
There are three major systems that can be distinguished in many parts of the world economy within these basic models there will be a range of variations and differences.
Planned (Command) Economy
An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods and services are produced and how they are distributed. Typically associated with a socialist or communist country.
The means of production are publicly owned in the form of state control or as a collective ownership and various committees make decisions regarding their use. The government owns scarce resources and all economic decisions related to the allocation of resources and investment is under the control of an authoritative body (i.e. government). There is a market for consumer goods and labour but very often the consumers do not have the choice to spend their money in a way they would like as the state sets production targets and growth rates according to its own view of people’s wants. Income and wealth distribution is decided by the state, therefore market prices have little part in informing resource allocation decisions and queuing rations for scarce goods.
Advantages
• Duplication of resources can be eliminated
• More control to achieve goals of economic and social well-being
• No inflation as prices are controlled
• Very low unemployment levels
Disadvantages
• Loss of independence and free choice
• Lack of variety and quality of goods and services available for consumers
• Extreme administration and supervision levels result in high outlay costs combined
a) Explain how different economic systems attempt to allocate scarce resources. Outline the economic system of the UK.
The allocation of resources is an economic theory concerned with the discovery of how nations, companies or individuals distribute economic resources or inputs in the economic marketplace. Traditional business inputs are land, labour and capital.
There are three major systems that can be distinguished in many parts of the world economy within these basic models there will be a range of variations and differences.
Planned (Command) Economy
An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods and services are produced and how they are distributed. Typically associated with a socialist or communist country.
The means of production are publicly owned in the form of state control or as a collective ownership and various committees make decisions regarding their use. The government owns scarce resources and all economic decisions related to the allocation of resources and investment is under the control of an authoritative body (i.e. government). There is a market for consumer goods and labour but very often the consumers do not have the choice to spend their money in a way they would like as the state sets production targets and growth rates according to its own view of people’s wants. Income and wealth distribution is decided by the state, therefore market prices have little part in informing resource allocation decisions and queuing rations for scarce goods.
Advantages
• Duplication of resources can be eliminated
• More control to achieve goals of economic and social well-being
• No inflation as prices are controlled
• Very low unemployment levels
Disadvantages
• Loss of independence and free choice
• Lack of variety and quality of goods and services available for consumers
• Extreme administration and supervision levels result in high outlay costs combined
Bibliography: R. Dransfield, E. fox, P. Guy, D. Needham, J. Wilde. (2004) Business for Foundation degrees and Higher Awards. Heinemann Educational Publishers, Oxford. I. Worthington & C. Britton, (2000) The Business Environment. 3rd ed. Pearson Education Limited, Essex I. Worthington, (2007) Strategy and Management. Pearson Education Limited, Essex A. Blair, (2002) Britain’s Road to Monetary Union. Pearson Education Limited, Essex A. Anderton, (2008) Economics 5th ed. Pearson Education Limited, Essex Other resources The Times Newspaper (various editions) HND course notes www.dti.gov.uk