RIZWAN UK

 Economics studies the

use of scarce resources to
produce goods & services to
distribute among competing
groups/individuals.

 Macroeconomics looks
at the operation of a nation’s
economy as a whole.

 Microeconomics looks
at the behavior of people and
organizations in particular
markets.
 Three Economic Systems
Mixed
Socialism

(Highly Controlled) (Little Control)

Communism Capitalism
 Understanding Free Markets or Capitalism

 CAPITALISM is an economic system in which all or most

of the means of production and distribution are privately
owned and operated for profit. No country is purely
capitalist, but the FOUNDATION OF THE U.S. IS
CAPITALISM.

 Capitalism is the foundation for the economics of

England, Canada, Australia, and most developed
nations.
 Free-Market/Capitalism
In a free-market system, decisions about what to produce and
in what quantities are made by THE MARKET (not the
government). Therefore, Consumers send signals to
producers about what to make, how many, and so on
through their buying behavior.
.
 How Free Markets Work
People under free-market capitalism have four
basic rights:
1. Private Property - individuals can buy, sell, own
property and pass it on.
2. Profit/Ownership - right keep profits.
3. Freedom of Competition - right to compete
within government guidelines.
4. Freedom of Choice - people can choose where
they live, work and what they do
Socialism – is an economic system based on
the premise that basic industries should be owned or
controlled by the gov’t. so that resources my be
more evenly distributed. Example: Denmark &
Netherlands.

 Private & Public Ownership

 Some Choices are Limited
 Creates Social Equality
 Reduces Individual
Incentive- Brain Drain
Mixed Economy – is an economic and
political system in which the Government makes almost all
economic decision and owns all the factors of production.
Example: North Korea & Cuba. Problem: Gov’t has no way
to know what to produce because prices don’t reflect
supply/demand!

 Stateor Gov’t ownership of factors of

production.
 Central Planning/Controlled Economy

 Managers = Mandatory Party

Membership
Problems Of Economic Organization In Capitalism System

Inequality in distribution of goods & services

Some essential goods & services (those consumed on collective basis)

will not be provided by private sector, e.g. defence, police etc.

Monopoly situations can arise, which may lead to unfair practices

Fluctuating demand is characteristic, which leads to periods of high

unemployment and high inflation
 Problems Of Economic Organization In
Mixed Economic System
(1) The government owns all the businesses and
properties (the means of production).
(2) There is no freedom of speech.
(3) Consumers needs are not taken into consideration.
(4) Productivity and efficiency is difficult to achieve
without profit motive for the workers.
(5) Central planning is difficult to achieve.
Problems Of Economic Organization
In Socialism System

The scope for business is much more poor which

reduces us working with international companies
in the world market
(1) There is no competition and less diversity
(2) Domestic businesses do not have the
motivation to get rich
(3) It is sometimes hard for the government to
manage everything.