Solving Economic Problem

Sukhman Mehrok
Economics Essay
Whatis an economic system? How doesAustralia’s system attempt to solve

the economic problem? In your answer use specific examples to demonstrate
how the government interferes with marketforces.
Economic systemsare the way in which countries/governmentsdistribute and

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allocate their resources and goods/services. Different governments have their
own economic system which they use to answer the economic problem of
satisfying unlimited wants with limited resources. Thus each country has a
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different approach to this problem. When considering the answer to the
economic problem, governments first need to answer the four important
questions - what to produce, how much to produce, how to produce and for
whom to produce. These questions must be considered in order to understand
the country’s economic situation and the various methods needed to be
implemented to ensure economic prosperity and growth. Countries can adapt
various economic systems such as a planned (command) economy, market
economy, or even a mixed economy. Australia follows the mixed economy
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approach to answer the economic problem.
Australia is one of the largest mixed market economies in the world. It is
considered to be a free market in which the market is expected to ‘control
itself’? and has little government intervention. This allows consumers and
sellers to interact freely in the exchange of goods and services. Governments
have little intervention, and unlike planned economies they do not entirely
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control the market forces. However there is enough intervention to prevent
market failure. Australia is answering the economic problem and the four
important questions by several methods to effectively satisfy as much wants as
possible with limited resources.
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Find more study resources at https://www.thinkswap.com

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Sukhman Mehrok
The demand of consumers heavily impacts what is produced in a free market
economy. In other words,it is consumer sovereignty rather than government
planning that dominates production in our economy.This idea of a free market
allows the economyto run byitself without the governmentcontrolling what
needs to be produced. For example if Coca Cola is in demand more than Pepsi,
businesses will produce more of Coca Cola to satisfy consumers whilst boosting
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their own profits. This concept influences the production in an economy and
how the economic problem is solved. However, governments have a certain
degree of intervention in a mixed-economy. In Australia governmentsarestill

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responsible for approximately 20% of the decision making in the distribution
and allocation of resources. An example of governmentintervention is that the

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Australian governmentprohibits the production ofillicit drugs and other
substancessuch as cocaine. Even though cocaine may be sought after amongst
certain consumers, the governmentillegalises the production and distribution
of it for countless reasons. Thus, Australia’s approach to solving the economic
problem constitutes of a free market where consumer demand is the most
prominent market force within the Australian economy.
Australia’s market system allows consumers to communicate their preferences
of goods and services to businesses. In order to avoid losses, businesses will
limit or increase production based on the signals they receive from rising or
falling market prices. This means if consumer spending is high for a certain
item, businesses will increase its production with intention of increasing
profits. Generally the question of “how much to produce”is answered without

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any government intervention. However governments can influence how much
of a good or service is produced. Sometimes some socially desirable goods and
services are under-produced or too expensive for consumers to afford such as
hospitals, education and health insurance. In this case, governments can
> thinkswap
1627440882
Sukhman Mehrok
encourage the production or consumption of these goods and services through
government services or subsidies. More specifically, the Department of
Agriculture and Water Resources (Australian government) enforces quotas on
various items. Quotas are trade restrictions that limits the number of goods
and services that can be imported or exported. These quotas boostlocal
investment as less items are being imported into the country which ultimately
lowers prices. This method allows the governmentto increase the production
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of goods and services and encourage spending. Therefore, the “how much to
produce”question is primarily answered by consumer preferences but also by
a little degree of governmentintervention that aids in economic prosperity.
Businesses are freely allowed to choose their method of production but must
abide by the laws set out by the government. Decisions on how to produce
goods/services are impacted by the cost of production of goods and services.
Usually businesses will select the lowest cost of production so they can
maximise profits. Sometimes these decisions mean that some businesses may
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result in practicing illegal behaviour such as paying employees below minimum
wage and using low quality resources. In these circumstances, the Industrial
Relations Commission (IRC) and the Fair Work Ombudsman regulate and
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monitor illegal practices in the workplace. The IRC is a court which hears cases
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relating to the workplace and provides a legal framework for businesses to
abide by. Fair Work Australia is also a government body responsible for
protecting employees from unfair and illegal treatment. Through these bodies,
the governmentis able to influence the cost of factors of production and how
they are used in the process. Although businesses are free to select their
methods of production, they must follow strict legal procedures that aim to
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provide a fair and safe workplace for all Australians. Hence In attempt to
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answer the economic problem, Australia’s adaptation of the mixed-economy 33yAt42JnkxG5z
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Sukhman Mehrok
and its free market allows businesses to answer how items are produced under
the supervision of governmentpolicies.
Goods and services are allocated to society based on an individual’s economic
power. Those with a higher economic power and greater wealth will have
greater access to goods and services as opposed to those who are poor. Due to
Australia’s free market, some membersof society will be unable to purchase
essential goodsor services such as healthcare. Generally businesseswill
produce for the wealthier in an attempt to maximise profit margins and
increase businesses efficiency. To combat this, Australia provides a social
security net for the disadvantaged in the form of welfare and other services
such as Centrelink. Centrelink administers social welfare payments for those
who arestruggling with monetary problems whichassists in the protection of
Australians. By protecting Australians, the governmentis able to encourage the
growth of the economy bylifting the incomes of welfare recipients so they can
purchase more goods and services. Low levels of spending can be detrimental
to a free market economyand can hinder its growth. Taxation plays a big role
in achieving fairness for all Australians. For example those who fit into a higher
income bracket are taxed more than those in lower brackets, thus ensuring
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that the ‘rich don’t get richer and the poor don’t get poorer.’ Furthermore to
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combat the issues of high levels of low income earners, a minimum wageis set
by Fair Work Australia. This ensures that workers are able to purchase
necessities and enjoy reasonable living standards. Therefore to reduce income
inequality and ensure economic prosperity, the government provides a social
security net in the forms of Centrelink and other various groups/services.

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Theseservices allow countries like Australia to answer the “for whom”
question and redistribute income to in an attemptto solve the economic
problem.
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Sukhman Mehrok
Australia attempts to solve the economic problem and answer the four
important questions by selecting a free market and mixed economy structure.
This economic system promotes greater interaction between consumers and
producers, and encourages individuals to work for their own financial growth.
There is however a certain degree of government intervention to prevent
marketfailure and protect individual’s by implementing a social security net.
Therefore, Australia’s answers the economic problem without heavy
government intervention, and relies on the progress and growth of consumers
and businesses.
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Solving Economic Problem

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Sukhman Mehrok

Whatis an economic system? How doesAustralia’s system attempt to solve

Economic systemsare the way in which countries/governmentsdistribute and

allocate their resources and goods/services. Different governments have their

different approach to this problem. When considering the answer to the

economic problem, governments first need to answer the four important

whom to produce. These questions must be considered in order to understand

the country’s economic situation and the various methods needed to be

implemented to ensure economic prosperity and growth. Countries can adapt

various economic systems such as a planned (command) economy, market

economy, or even a mixed economy. Australia follows the mixed economy

Australia is one of the largest mixed market economies in the world. It is

considered to be a free market in which the market is expected to ‘control

sellers to interact freely in the exchange of goods and services. Governments

control the market forces. However there is enough intervention to prevent

important questions by several methods to effectively satisfy as much wants as

possible with limited resources.

Find more study resources at https://www.thinkswap.com

The demand of consumers heavily impacts what is produced in a free market

economy. In other words,it is consumer sovereignty rather than government

planning that dominates production in our economy.This idea of a free market

allows the economyto run byitself without the governmentcontrolling what

how the economic problem is solved. However, governments have a certain

degree of intervention in a mixed-economy. In Australia governmentsarestill

responsible for approximately 20% of the decision making in the distribution

and allocation of resources. An example of governmentintervention is that the

Australian governmentprohibits the production ofillicit drugs and other

substancessuch as cocaine. Even though cocaine may be sought after amongst

certain consumers, the governmentillegalises the production and distribution

of it for countless reasons. Thus, Australia’s approach to solving the economic

problem constitutes of a free market where consumer demand is the most

prominent market force within the Australian economy.

Australia’s market system allows consumers to communicate their preferences

of goods and services to businesses. In order to avoid losses, businesses will

item, businesses will increase its production with intention of increasing

profits. Generally the question of “how much to produce”is answered without

any government intervention. However governments can influence how much

of a good or service is produced. Sometimes some socially desirable goods and

services are under-produced or too expensive for consumers to afford such as

hospitals, education and health insurance. In this case, governments can

encourage the production or consumption of these goods and services through

government services or subsidies. More specifically, the Department of

Agriculture and Water Resources (Australian government) enforces quotas on

and services that can be imported or exported. These quotas boostlocal

produce”question is primarily answered by consumer preferences but also by

a little degree of governmentintervention that aids in economic prosperity.

goods/services are impacted by the cost of production of goods and services.

result in practicing illegal behaviour such as paying employees below minimum

relating to the workplace and provides a legal framework for businesses to

answer the economic problem, Australia’s adaptation of the mixed-economy 33yAt42JnkxG5z

the supervision of governmentpolicies.

Goods and services are allocated to society based on an individual’s economic

Australia’s free market, some membersof society will be unable to purchase

essential goodsor services such as healthcare. Generally businesseswill

produce for the wealthier in an attempt to maximise profit margins and

increase businesses efficiency. To combat this, Australia provides a social

such as Centrelink. Centrelink administers social welfare payments for those

who arestruggling with monetary problems whichassists in the protection of

Australians. By protecting Australians, the governmentis able to encourage the

necessities and enjoy reasonable living standards. Therefore to reduce income

inequality and ensure economic prosperity, the government provides a social

security net in the forms of Centrelink and other various groups/services.

Theseservices allow countries like Australia to answer the “for whom”