Economic systems – how economic resources are allocated, страница 2

     There is another impotent problem concerning the choise between the present and the future.Many of the resources we are using today are non-replaseable.Modern civilization is very dependent upon non-replaseable minerals such as oil, copper, zinc, tin, lead and so on. Should we make the maximum use of the resources now,or should we restrict the use we make of tham so that supplies will be available for future generations?

Full employment.

   It is quite obviouse that a country is not getting the most out of its economic resources if some of them are lying idle.In the mode-1980s, many workers are large amounts of capital were unemployed countries.The actual outputs of goods and services in this countries were much less than the possible outputs. All countries would like to make the fullest use of there economic resources, but many of them found it difficult to achieve this objective.

3.3.Types of economic system

The economic systems which have been adopted to deal with these economic problems differ from country to country; each has its own particular features. Nevertheless, some of the systems are very similar to one another,and they can be classified into there or four groups.

Traditional economies.

    There are communities wish relatively low living standarts.Where the way of life has remained virtualy unchanged for centuries. Isolated village in Africa and Asia, and the nornadic Bedouin tribes, provide examples of traditional economies.

    In this type of economy, people live according to age-old customs- doing things the way they have always been done.What is to be produced, and how it is to be produces and shared out, are not seen as economic problems, becouse these things have all been decides long ago.These economies are often described as subsistence economies because what is producted, in most cases, amounts to little more than the minimum necessary for survival.

Market economies.

Any arrangement which enables buyers to do business with sellers is described as a market.A market economy is one in considerable freedom for people to buy what they want and sell what they produce.Prices are determined by the strenght of people’s demand of goods and services,and the quantities which suppliers are prepared to offer for sale, that is, by the market forces of demand and supply.Some of the main features of a market economy are set out over the page.

1.Private property.

Individuals have the right to own,control and dispose of land,buildings,machineryand other natural and manufactured factors of prodution.It is feature of market economies which couses them to be described as a capitalist economies.

2.Freedoms of choice

Individuals are free to set up in business for themselves ,firms are free to decide what and how they should produce, workers are free to enter and leave occupations, and consumers are free to spend their incomesas they wish.

3.Self – interest.

The system encourages people to do what is best for themselves.Firms will try to maximise profits,workers will try to maximise their incomes,and consurners will try to maximise their satisfactions.

4. The price mechanism (competitions)

In a market economy,changes in the demand for goods and services, or changes in the supply of goods and services, or both,cause changes in prices.It is these changes in prices wich lead to changes in way in wich economic resources are used.

For example,if the demand for a commodity will become more scarce and its price will increase.This increase in price will make it more profitable to produce. Firms producing this commodity therefore, will be tempted to enter this industry. An increase in demand, therefore, will cause more resources to be used in the production of this commodity.

If the demand for a commodity falls, its price will tend to fall. It will become less profitable to produce, and this will lead to a fall in output. Fewer resources will be used in this industry.

A fall I the costs of produsing a commodity will lower its price. Consumers will tend to buy more at lower prices, and production of the commodity will increase.

In a market economy, changes in prices act as a kind of signaling device to produces and consumers, and cause them to change their plans. This is more fully explained in Chapter 8.