Socialist and Capitalist Economy Economy is the entire process and network, through which goods and services are exchanged in a country or state; and the system of production, allocation of resources, distribution and exchange of goods and services is called economic system. Moreover, the relation and condition to use resources for production and trade with law, custom and government of a country is called political economy. However, under political-economic systems, various types of economic systems have influenced such as; capitalism, socialism, communism and so forth. Capitalist and socialist economies are the most common economic systems in the world, where their major differences are in the economic equality and the role of government;
Universally, free market economies exist to fulfill the wants or needs of consumers by supply and demand. People have the leeway to plan their own business by buying and selling goods without the government’s help. This is evident because a free market economy is solely based on the “laissez- faire” approach and self-interest which was introduced by Adam Smith. Although, free market economies may not be a completely perfect system, it contributes countless gains to society as well as individuals such as economic freedom, efficiency, independence, human rights, and many more within society which thus has shaped the world into what it is molded into today creating a legacy based on Adam Smith’s ideas. Adam Smith, a renown political
Two characteristics of a mixed economy are governments as well as the public has a say in the economy and there is free and controlled development and an example of a mixed economy is the United States. A free market economy is an economy in which there is no government interference in any economic activity. Two characteristics of a free market economy are almost all of the country's factors of production are owned privately and firms can sell anything they want. An example of a free market economy is
Sole Traders One of the three types of business ownership is a â€˜Sole Traderâ€™. A sole trader is an exclusive individual who owns the business which has been established. There are many advantages and disadvantages to this type of ownership alongside with any type of ownership. The formation of this type of business ownership is straight forward due to only one person owning the business and not multiple people possible disagreements between partnerships can be avoided. When a business is owned by a sole trader the firm generally is on the smaller side of the scale and is therefore usually easier to set up.
There are three main types of economic system that have already existed in the 20th century which are command economy, capitalist economy and mixed economy. However, we can relate these three economic systems with government, business and society because they are interrelated to each other. The first economic system is command economy where there is no private ownership of property and the government takes full responsibility for the economy. In this type of economic system, production is not undertaken for profit. The government decides the amount of production and usage that they want which means that the goods and services can be produced in the quantities the government thinks best for the society.
The rights of the individual are respected and protected subject only to the requirements of public law and order and morality. The benefits of mixed economic are producers and consumer have sovereignty to choose what to produce and what to consume but production and consumption of harmful goods and services may be stopped by the government. A mixed economy represents and achievable balance between individual initiative and social
The government may tax the private sector, and use the tax money to promote social objectives. Capitalism allows the force of demand and supply to set the prices of goods and services. Socialism fixes prices through central planning, mixed economic system allows its prices to fluctuate, and fixing other prices, such as energy. Advantages of mixed economy • As mixed economic involves both government and government enterprises, it can be able to take the benefits of capitalist such as the nature of private companies and socialist nature of government(retrieved from www.festsystem.com/businessstudies/mixedeconomy-advantagesdisadvantages) • Economic growth of the economy will be balanced as there won’t be that much inequity of income. • In the mixed economy, individuals can run their own business and make their own profit.
A socialist economy limits rights to private property, especially property used to generate income. Government controls such property and makes housing and other goods available to all, not just to the people with the most money. 2. Pursuit of collective goals. The individualistic pursuit of profit goes against the collective orientation of socialism.
Government plays major role in economic growth as well as distribution of wealth. For instance, our government imposes tax and gives subsidies at the same time for the citizens. The victory of mixed economic system commenced in Malaysia with the initiative of Central Government with the establishment of National Development Plan. In Malaysia, the planning revolves around the Economic Planning Unit and other central departments while the Malaysia’s experience in controlling the implementation of national developments structured and projects have contributed towards the victory of this national socioeconomic progress utilizing mixed economic
As market economy’s resources are fully allocated towards goods and services (Wadhhwa, 2015), this indicates that there are no resources allocated for the country. Unlike in the market economy which is driven by self-interest, government in a planned economy uses its authority for the well-being of the society by allocating resources fairly to all aspects including production of goods and services. This allows people to have a broad range of welfare benefits such as healthcare, education and improvement in infrastructure. According to Amadeo (2018), the reason for success in the United States is because the Constitution has included a goal to encourage general welfare. Hence, for a country to be successful, the welfare of the society is as significant as earning revenue.