Three Types of Economies and Economic Problem of Scarcity (GC011)
Macro Economics
Macroeconomics is the branch of economics that is associated with the behavior of individual entities like market, organizations, households, etc. The example can be, how individual price is set, how the price of land, capital and labor is set, investigate the strength and weakness of the market mechanism, etc.
Economic Systems
There are three basic kinds of economies: Centrally planned economy, Market economy, and Mixed economy.
Centrally Planned Economy
This kind of economy is also called ‘Command Economy’. In this economy, a great deal of planning is involved and the government makes all of the economic decisions aiming to see greater economic equality among users or consumers. The government decides what products have produced, how to be produced and how it is to be allocated, distributed or exchange to users or consumers. The planning of the products and services can be to satisfy the needs of all the citizens of the country in spite of only for those who have money to pay.
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Mixed Economy
This economy is a mixture of a command economy and a free-market economy. In this economy, some products are produced by government planning and some products are produced in the free-market sector. In the same way, some products are allocated or exchanged by the government and others are distributed or allocated by the market mechanisms.
Market Economy
This type of economy is also called ‘Free Market Economy’. In this economy, all of the decisions are made by the market mechanisms. The force of the demand and supply determines how the resources are allocated, where there is no government interference. Which products should be produced is dependent on the profitability of the particular products, where consumers can cast their spending votes in the market place. How the products should be organized or distributed also is based on the profitability of the products.
The market mechanism encourages organizations to adapt to the efficient method of production and distribution. The products are allocated to the consumers who have money to pay, Consumers who do not have enough money they cannot afford to buy any products.
Economic Problems of scarcity
The problem of scarcity is an economic problem. The reason for arising this problem is consumers have unlimited wants and needs in comparison with limited resources. In another word, it happens when there are lots of wants or demands but not enough resources to produce and supply.
There are only limited numbers of resources like machines, factories, workers, raw materials, suppliers, etc. Yet there are a number of different ways in which they can be used. In the same way, consumers have only a limited amount of money, although they have unlimited wants and needs……..
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