ECO113

BUSINESS ECONOMICS

Dr. Md Abusaad
Assistant Professor
Learning Outcomes

After this lecture, you will be able to

✓ Understand various economic
system.
News
 Economic System

• An economic system is a means by which

societies or governments organize and distribute
available resources, services, and goods across a
geographic region or country.
• Economic systems regulate factors of
production, including capital, labor.
 Types of Economic System

Market Economy:
Market economic systems are based on the
concept of free markets. In other words,
there is very little government interference.
• Key features:
• Private ownership
• Decentralised decisions
• Self interest- profits, utility
• Allocation by price
• Efficiency is valued
• Advantages:

• Efficiency

• Minimum state intervention,

less administrative cost

• Individual choices

• Driven by profit
• Disadvantages

• Inequalities

• Exploitation of poor

• Overlooks economic welfare

Command Economy:

• In a command system, there is a dominant,

centralized authority – usually the
government – that controls a significant
portion of the economic structure.
Key features:

• State ownership

• Centralised decisions

• Collective welfare

• Allocation by non price mechanism

Advantages:

• Collective goods provision

• Employment security

• Equal opportunity
Disadvantages:

• Inefficient system

• Complicated process

• Lack of profit
Mixed Economy:

Both private and government firms take

part in economic activity.
Key features:

• Co-existence of Private and Public Sector

• Personal Freedom

• Private Property is allowed

• Economic Planning

• Price Mechanism and Controlled Price

• Profit Motive and Social Welfare

Advantages:

• Permits private participation in production

• Allows healthy competition that can result in profit.

• Contributes to public ownership in manufacturing,

• which can address social welfare needs.

Disadvantage:

• One disadvantage of mixed economies is that they

tend to lean more toward government control and
less toward individual freedoms.
That’s all for now…