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Economic Systems
An economic system is what allows a country to decide what to produce, how to
produce, and for whom to produce. These systems include natural resources, labor,
capital, management and standards for creating products.
Market Economies
In market economies, i) ownership of private property is encouraged, ii) businesses
are encouraged to produce better products, iii) competition is encouraged because it
can create better quality and lower prices, iv) the Government has little direct
involvement with the business itself, and v) self- sufficiency is not seen as an
economic goal.
Supply and demand control market economies. The law of supply states that
as the price of a product increases, producers will be willing to make more of that
product. The law of demand states that as the price of a product increases consumers
will demand less of that product. Producers must find the equilibrium point which is the
point at which the consumers are willing to pay the asking price and the company still
makes a profit.
Centrally Planned Economies
In centrally planned economies the government controls the ownership of private
property. By having more government control the profit motive is not the main goal of
the business.
There are fewer pure centrally planned economies following the collapse of
communism in the former Soviet Union.
Mixed Economies
A mixed economy includes government involvement and private ownership of
businesses. In some countries, the government owns the transportation and
communication businesses. In socialist mixed economies, most of the main
industries are government controlled, but citizens are free to work in other industries.
Canada has a mixed economy. Because Canada has a large, land mass and a relatively
small population, the Canadian government has to play a major role in our important
industries. Sweden, Italy, and Australia have also adopted mixed economy systems.
Governments privatize state owned enterprises. Privatization may occur when a country
moves from a centrally planned to a market economy, it can also happen in mixed
economies.
business. Internationally there are number of problems which had affected the international
economy as well as national economy such as problem in international trade, diseases like bird
flu, environmental condition such as disasters like tsunami in Japan, financial crisis etc. and for
these reasons globally coordinated efforts are required like international public goods whose
rules applies across the globe as a whole M., Ferroni and A., Mody, (2002).
Defining global economy
The term global or international economy refers to the combined world economy with a free and
open transaction of labour, technology, goods and services; it is a picture of an interconnected
international economy with an increased movement of capital. This concept could not be
understood in isolation but parallel to globalization which is an integration of consumption and
production in every market across the world. It is a clear view that globalization not only benefits
the country globally but also do the betterment for the whole global economy. Today the
international economy is considered as an economy with a common or combined market for all
goods and services produced EconomyWatch.com.
Privatization
Polices
Competition limited role of government
Price reformation promoting private investment
Source: author's creation
BENEFITS AND PROBLEMS
There are some benefits and problems involved in the economy shift from command economy to
the capitalism economy. Such as market based economy that is capitalism economy is always
achieves more efficiency compared to command economy and very less resources are wasted but
in negative sense initially there is a period of inflation, unequal economic distribution of income
and unemployment Dave, S., (2007).
Free trade
Economists favour free trade and recently US congress and US president have supported the
view for removing of trade barriers. It is not wrong to say that across the globe countries are
decreasing there trade barriers. And many have even signed multilateral and bilateral agreements
with other countries in neighbour or region.
sustainable products to the world. The innovation in the company looks beyond of just providing
product but also looking ahead to interact with communities, stake holders and customers as well
as relate themselves to the environment and various other ethical issues. With the new
organization structure they are now capable of meet more of customer's requirement and with
very strong global buying power, improved process and policies made it possible for the
company to further integrate the global functions SABIC annual report, (2009).