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Economic System of Pakistan

Economic System of Pakistan

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Published by Syed Hassan Raza

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Published by: Syed Hassan Raza on Nov 15, 2010
Copyright:Attribution Non-commercial

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03/12/2015

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Economic System
Economic System of Pakistan
BySyed Hassan Raza
Syed Hassan Raza1
 
Economic System
Economic System
An economic system is a mechanism which deals with the production, distribution andconsumption of goods and services in a particular society. The economic system iscomposed of people, institutions and their relationships. It addresses the problems of economics like the allocation and scarcity of the resources.There are several basic and unfinished questions that must be answered in order toresolve the problems of economics satisfactorily. The scarcity problem, for example,requires answers to basic questions, such as: what to produce, how to produce it, and whogets what is produced. An economic system is a way of answering these basic questions,and different economic systems answer them differently.But generally there we consider three basic types of economic system that are used allover the world.Planed economyMarket economyMixed Economy
Planed Economy
A planned economy is also sometimes called a command economy. The most importantaspect of this type of economy is that all major decisions related to the production,distribution, commodity and service prices, are all made by the government.The planned economy is government directed, and market forces have very little say insuch an economy. This type of economy lacks the kind of flexibility that is present amarket economy, and because of this, the planned economy reacts slower to changes inconsumer needs and fluctuating patterns of supply and demand.Planed economy became famous with Soviet Union choosing it for its attributes likeequal distribution of wealth and protection of interests of labor force. In these types of economies government controls all major sector of economy and made decisions aboutuse of resources and distribution of wealth. Government decides what to produce anddirect all lower level enterprises to produce goods in accordance with national and socialobjectives.A planned economy may consist of state-owned enterprises, private enterprises directed by the state, or a combination of both. A huge drawback of this system is that all theSyed Hassan Raza2
 
Economic System profits go to the government so this lead to decrease in investment. This type of systemmight stifle innovation and invention. It may not be quickly responsive to public desiredfor products and services and may even limit the freedom of the people. It is so realizedthat economic development cannot be achieved at the desired rate of growth without anyactive government help and guidance.
Market Economy
In a market economy, national and state governments play a minor role. Instead,consumers and their buying decisions drive the economy. In this type of economicsystem, the assumptions of the market play a major role in deciding the right path for acountry’s economic development.Market economies aim to reduce or eliminate entirely subsidies for a particular industry,the pre-determination of prices for different commodities, and the amount of regulationcontrolling different industrial sectors. The absence of central planning is one of themajor features of this economic system. Market decisions are mainly dominated bysupply and demand. The role of the government in a market economy is to simply makesure that the market is stable enough to carry out its economic activities properly.In this type of economy prices of factors of production and everything are decided bymarket forces of demand and supply. In this system companies work to maximum their  profit and thus produce goods which are demanded by public. A big drawback of thissystem is that companies try to maximize their profit and in this effort they ignore rightsof labor force and pay those minimum wages possible, this lead to unequal distribution of wealth. This system doesn’t guarantee of full employment and sometimes leads to water and air pollution and problems like inflation too.
Mixed Economy
Both Planed economy and Market economy had some major flaws which can bedisastrous for the economy, so a new economic system which includes features from both planed economy and market economy is used by most of the nations in the world. Thissystem is called Mixed Economy system.In this system private companies are allowed most power over decisions regarding profitsand distribution of wealth while government collects taxes from them to work for the benefit for the poor to help create equal distribution of wealth, government also regulatesSyed Hassan Raza3

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