Economies
Planned Economy:
"The social good"
In a planned economy, the factors of production are owned and managed by the government. Thus the Government decides what to produce, how much to produce and for whom to produce.
Features:
• All resources are owned and managed by the government
• No consumer OR producer choice
• The market forces can’t set the price for goods or services
• Profit is not the main objective, the government aims to provide services and goods to everybody
• Government decides WHAT to produce, HOW to produce and FOR WHOM to provide goods and services.
Advantages Disadvantages
-Prices are kept under control and everyone is able to afford goods and services
-There is less distinction between the social classes.
-There are lower levels of unemployment as the government seeks to provide jobs for everyone.
-No competition between firms -Consumers cannot choose
-The goods and serviced produced are decided by the government.
-Firms become inefficient because of the lack of competitiveness.
Examples: North Korea, Cuba, Libya, Iran
Free market Economic System:
“Self interest and profit”
The central thought of this system is that it should be the producers and consumers who decide how to utilise the resources. Thus, the market forces decide what to produce, how much to produce and for whom to produce.
Features:
• All resources are privately owned
• Profit is the main motive
• There is no government interference in business
• Producers can produce WHAT they want, HOW much they want, and FOR WHOM they want to produce.
• Consumers are allowed to choose
• Prices are decided by the demand and supply
Advantages Disadvantages
-Free market responds to the people’s wants
-Wide variety of goods and services
-More efficient use of resources are encouraged: profit is the only motive which drives firms to produce goods and services at lower cost -Unemployment: the economy only employs the factors of production which will
"The social good"
In a planned economy, the factors of production are owned and managed by the government. Thus the Government decides what to produce, how much to produce and for whom to produce.
Features:
• All resources are owned and managed by the government
• No consumer OR producer choice
• The market forces can’t set the price for goods or services
• Profit is not the main objective, the government aims to provide services and goods to everybody
• Government decides WHAT to produce, HOW to produce and FOR WHOM to provide goods and services.
Advantages Disadvantages
-Prices are kept under control and everyone is able to afford goods and services
-There is less distinction between the social classes.
-There are lower levels of unemployment as the government seeks to provide jobs for everyone.
-No competition between firms -Consumers cannot choose
-The goods and serviced produced are decided by the government.
-Firms become inefficient because of the lack of competitiveness.
Examples: North Korea, Cuba, Libya, Iran
Free market Economic System:
“Self interest and profit”
The central thought of this system is that it should be the producers and consumers who decide how to utilise the resources. Thus, the market forces decide what to produce, how much to produce and for whom to produce.
Features:
• All resources are privately owned
• Profit is the main motive
• There is no government interference in business
• Producers can produce WHAT they want, HOW much they want, and FOR WHOM they want to produce.
• Consumers are allowed to choose
• Prices are decided by the demand and supply
Advantages Disadvantages
-Free market responds to the people’s wants
-Wide variety of goods and services
-More efficient use of resources are encouraged: profit is the only motive which drives firms to produce goods and services at lower cost -Unemployment: the economy only employs the factors of production which will