Download Command Economy​ (Centrally Planned)

Command Economy​ (Centrally Planned) An economic system in which the means of ​production​ are publicly owned and economic activity is controlled by a central authority that assigns production goals and allots raw materials to productive enterprises. In such a system, determining the proportion of total product used for ​investment​ rather than ​consumption​ becomes a centrally made political decision. After this decision has been made, the central planners ​work​ out the assortment of goods to be produced and the quotas for each enterprise. Consumers may influence the planners’ decisions indirectly if the planners take into consideration the surpluses and shortages that have developed in the ​market​. The only direct choice made by consumers, however, is among the commodities already produced. Prices are also set by the central planners, but they do not serve, as in a ​market economy​, as signals to producers of goods to increase or decrease production. Instead, they are used mainly as instruments of the central planners in their efforts to reconcile the total demand for consumer goods with the supply available, allowing also for revenues to the state. The central authority in a command economy assigns production goals in terms of physical units and allocates physical quantities of raw materials to enterprises. The process for a large ​economy​ with millions of products is extremely complex and has encountered a number of difficulties in practice. Central planning of this kind is not without apparent advantages, however, since it enables a government to mobilize resources quickly on a national scale during wartime or some other national emergency. But the costs of centralized policies are real and quite high. Moreover, it is often the case that much of the burden of these costs is shifted away from the government. Taken from ​www.britannica.com Free Market Economy​ (Capitalism) Capitalism is based on private ownership of the means of production and on individual economic freedom. Most of the means of production, such as factories and businesses, are owned by private individuals and not by the government. Private owners make decisions about what and when to produce and how much products should cost. Other characteristics of capitalism include the following: ● Free competition. The basic rule of capitalism is that people should compete freely without interference from government or any other outside force. Capitalism assumes that the most deserving person will usually win. In theory, prices will be kept as low as possible because consumers will seek the best product for the least amount of money. ○ The antitrust lawsuit against Microsoft is one way that the government has tried to promote competition. Supporters of Microsoft say that forcing Microsoft to allow companies to bundle arch­rival Netscape's web browser with Microsoft Windows is not unlike making Coca­Cola include a can of Pepsi in each six­pack it sells. ● Supply and demand. In a capitalist system prices are determined by how many products there are and how many people want them. When supplies increase, prices tend to drop. If prices drop, demand usually increases until supplies run out. Then prices will rise once more, but only as long as demand is high. These laws of supply and demand work in a cycle to control prices and keep them from getting too high or too low. *Taken from www.ushistory.org Traditional Economy A traditional economy is a type of economic system that relies on custom or tradition to answer the basic economic questions. That is, society's blueprint for economic activity is written by previous generations. Historically, traditional economies produced goods that satisfied basic survival needs for food, clothing, and shelter. These isolated peoples produced few surpluses and, as a result, there was little trade. Production methods, which relied on the use of primitive capital goods and a rigid division of labor, varied little from one generation to the next. Primitive communalism, based on community needs and kinship ties, helped determine who shared in the economy's output. Today there are few traditional economies. Small enclaves of people living in remote regions of Africa, Asia, Latin America, and the Arctic regions have many characteristics of traditional economies. *Taken from ​http://academlib.com/ Mixed Economy​ (Dual Economy) A mixed economy is defined as an ​economic system​ consisting of a mixture of either markets​ and ​economic planning​, ​public ownership​ and ​private ownership​, or ​free markets​ and ​economic interventionism​. ​​ However, in most cases, "mixed economy" refers to ​market economies​ with strong ​regulatory​ oversight and governmental provision of ​public goods​, although some mixed economies also feature a number of ​state­run enterprises​. In general the mixed economy is characterised by the ​private ownership​ of the ​means of production​, the dominance of markets for economic coordination, with profit­seeking enterprise and the ​accumulation of capital​ remaining the fundamental driving force behind economic activity. But unlike a free­market economy, the government would wield indirect macroeconomic influence over the economy through ​fiscal​ and ​monetary policies​ designed to counteract economic downturns and capitalism's tendency toward financial crises,​unemployment​, and growing income and wealth disparities, along with playing a role in interventions that promote ​social welfare​. ​​ Subsequently, some mixed economies have expanded in scope to include a role for ​indicative economic planning and/or large ​public enterprise​ sectors. In reference to ​post­war​ Western and Northern European economic models, as championed by ​Christian democrats​ and ​Social democrats​, the mixed economy is defined as a form of capitalism where most industries are privately owned with only a minority of public utilities and essential services under public ownership. In the post­war era, European social democracy became associated with this economic model. Economies ranging from the United States​ ​to ​Cuba​ have been catalogued as mixed economies. The term is also used to describe the economies of countries which are referred to as ​welfare states​, such as the ​Nordic countries​. ​​ Governments in mixed economies often provide ​environmental protection​, maintenance of ​employment standards​, a standardized ​welfare​ system, and ​maintenance of competition​. *Schiller, Bradley. ​The Micro Economy Today, McGraw­Hill/Irwin, 2010