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Topic 3. Economic Systems PDF
Topic 3. Economic Systems PDF
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Advantages: Disadvantages:
1. No freedom of choice for consumers or producers
1. Full employment of all available resources 2. System is too rigid to adjust when changes occur, can result in
shortages
2. Government possess the information to be 3. Lack of incentive for workers results in low morale and
able to direct resources where they are most efficiency. Managers also are not motivated.
needed. 4. There are too many officials, and too much unnecessary
procedure and paperwork (red-tape or bureaucracy)
3. Wasteful competition is avoided
5. There is wastage of manpower because large numbers of
people are required for central planning.
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Property
Types of Economics on the Basis of
Level of Development
• Property is the ownership of resources or
other tangible objects, or intellectual property
• Developed economy
• Property is usually considered to be
• Developing economy ownership and control over a resource or
good
Property rights
• Property rights are theoretical constructs
Resources and goods can be owned by: in economics for determining how goods are used
and owned
• individuals, • Economic theory contends that government
enforcement of strong property rights is a determinant
• associations, regarding the level of economic success seen in the
• governments area.
• Individuals will create new forms of property to
generate wealth, only when they are assured that their
rights to their property will protect them against unjust
and/or unlawful actions by other parties.
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Property-rights regimes
Transaction costs are costs incurred in making an economic • State property (also known as public property) is
exchange
property that is owned by all, but its access and
Transaction costs can be divided into three broad categories:
• Search and information costs are costs such as those
use are controlled by the state. An example is a
incurred in determining that the required good is available national park.
on the market, which has the lowest price, etc. • Common property or collective property is
• Bargaining costs are the costs required to come to an
acceptable agreement with the other party to the property that is owned by a group of individuals.
transaction, drawing up an appropriate contract, Access, use, and exclusion are controlled by the
negotiation and so on. joint owners.
• Policing and enforcement costs are the costs of making sure
the other party sticks to the terms of the contract, and • Private property: access, use, exclusion and
taking appropriate action (often through the legal system) if management are controlled by the private owner
this turns out not to be the case. or a group of legal owners
Nationalization
• Nationalization (an alternative spelling
is nationalisation) is the process of taking a
private industry or private assets into public
ownership by a national government or state