ECONOMIC SYSTEM

An economic system refers to the way in which the available productive

resources are owned and the way society takes decisions on issues relating to the basic
economic problem.

CAPITALISM OR FREE MARKET ECONOMY.

Capitalism or free market economy may be defined as the type of economic system in which
the means of production are owned and controlled by private individuals .

Or it is the type of economic system which is characterised by private ownership of means of

production .

FEATURES OF CAPITALISM OR FREE MARKET ECONOMY.

1. private owership of properties :- there is high degree of Private ownership and control of
means of production with minimal participation of the state.

2. Maximization of profit :- capitalism is characterised by high level of profit maximization

by private individuals.

3. Freedom of choice :- In a capitalist system, many commodities are produced and these
enable consumers to have wide range of choice.

4. Accumulation of wealth :- As a result of individual ownership of means of production,

capitalism helps him accumulate wealth.

5. Exercise of individual are free to initiative their own kind of production of commodities
that give them satisfaction and profit.

ADVANTAGES OF CAPITALIST ECONOMY.

1. Free enterprise :- capitalism encourages maximum freedom of enterprise. People are

not forced into a system, Willy nilly.

2. Talent are fully utilised :- All known talents of privates individual are put in place
during the process of production

3. It promotes higher standard of living :-The production of goods and services with
competitive prices for them to raise the standard of living.

4. It encourages hard work :- In capitalism , people are free to own properties and this
encourages hard work.

5. It leads to specialization capitalism also boots specialization due to increases in

large scale production of commodity.
6. Provision of alternative choice :- The availability of goods and services produced by
private individuals enables consumers to have wide range of choice.

DISADVANTAGES Of CAPITALIST ECONOMY.

1. It increases crime rate :- in an effort to acquire wealth at all cost many embrace
crime.

2. Profit maximization at all cost:- In a capitalist economy, private individuals are

interested in making profit by all means.

3. It created Monopoly :-As a result of the economic activities of few individual

investors Monopoly can easily be created.

4. It causes waste and inefficiency are recorded in a capitalist economy in an effort

to produce goods and services.

5. Few individuals are enriched :- In capitalism only few individuals are enriched
while many are poor .

6. It leads to economics exploration:- Exploration of the majority by few individuals

is one of the problems of capitalism.

SOCIALISM

Socialism also called centrally planned or controlled economic system is defined

as the type of system in which the means of production and distribution are
collectively owned and controlled by the state .

FEATURE OF SOCIALIST ECONOMY.

1.Freedom of choice :- as a result of abundant goods and services provided the

consumers have a wide range of choice.

2. Non price competition :- price of commodities are fairly stable unlike price
competition in capitalist economy.

3.state ownership of means of production :- All means of production and

distribution are owned and controlledby the state.

4. Non profit motive :- the motive socialist economy is not to make profit

5. Promotion of welfare :- primary aim of socialism is to provide goods and

services for the welfare of the citizens.

6.Equitable distribution f income :- income is equitably distributed to all citizens

in the state.
ADVANTAGES OF SOCIALIST DEMOCRACY.

1. Choice of production :- the consumer have a wide choice as to what to

produce

2. Provision of more :- goods are produce in large quantities of general citizens.

3. Economic security:- Jobs and employment for the citizens are guaranteed
and secured.

4. Employment opportunity:- Employment opportunities are readily available in a

socialist economic system.

5. Equitable distribution of income :- since every body in a socialist democracy

is generally employed ,income is evenly distributed among the citizens.

6. Centrally planned market:- Government take decision on goods and services

produced and their markets.This make it to be centrally controlled by the
government.

DISADVANTAGES OF SOCIALIST ECONOMY.

1. Lack of specialization :- socialist economy does not encourage division of

labour and specialization.

2. Absence of competition :- there is complete absence of competition n a

competition ina socialist economy as all goods and services are provided
by the government.

3. It creat rooms for laziness :- since government provides everything for the
people,it breeds laziness among citizens.

4. Absence of alternative choice :- consumer have no alternative choice of

commodities produced . They must have to accept what ever was
produced.

5. It reduces individual initiative:- socialism reduces individual initiative as

the citizen depend solely on government for every thing.

6. It leads to state Monopoly :- it leads to state Monopoly as the state

provides all essential goods and services for the citizens.

MIXED ECONOMY.

Mixed economy can be defined as the type of economic system in which

both the private and public ownership of means of production and
distribution exist together in a country..
FEATURES OF MIXED ECONOMY.

1. Fair competition :- since the system accommodates the private and

state ownership of production it result in fair competition.

2. Freedom of choice:- consumers in this system have freedom of

choice.

3. Economy freedom :- there is also economic freedom in the area of

production, consumption and distribution of commodities .

4. Joints decision:- Decision on what to produce and the quantity are

jointly taken by both the private and public sectors.

5. Check and balances:- The combination of both private and public

sectors helps to put a lot of checks and balances in the economy.

ADVANTAGES OF MIXED ECONOMY.

1. Equitable distribution of income :- mixed economy ensure that

income are equitably distributed among the citizen .

2. Combined the good qualities of capitalism and socialism :- Mixed

economy combines the good qualities of both capitalism and
socialism.

3. It encourages private initiative:- private initiative in this type of

economic system are highly encouraged.

4. It ensures job security:- This system also promotes the security of

job and employment.

5. It prevents Monopoly:- Monopoly is prevented because of the joint

participation in economic activities by both the private sector and
the state.

DISADVANTAGES OF MIXED ECONOMY.

1. Inequality of wealth:- wealth is not equitably distributed as

there is wide gap between the rich and the poor.

2. Corruption and mismanagement:- There is a high level of

corruption and mismanagement of resources in a mixed
economy.

3. Lack of efficiency :- efficiency scarcely occurs in this type of

economic system because of the involvement of the state.
4. Emphasis on profit :- there is more emphasis on profit
maximization at the expense of welfare of the citizens.