Notesale: Turn your study into money

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Chapter 2: Economic systems

What should be produced, how should we produce it, and for whom?
Each economic system answers these questions in their own way
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Often live in tribes (Khoi-San, Amish) and based on agriculture/hunting/fishing/gathering
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° there is rarely a surplus produced

ADVANTAGES:
° each person understands what their job is
° everyone aware of how resources will be distributed & what they will receive for their work
° less destruction to environment because they farm and use the land in a positive manner
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Key feature of any communist society
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ADVANTAGES:
°low unemployment rates due to the regulation of jobs by the government
°everyone has access to health care services and necessary services needed to live
°the state can concentrate resources towards particular ends
°social welfare seen as a priority
DISADVANTAGES:
°reduced personal freedom: people must work one type of job because gov demands it
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Their income is dictated by gov as well
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°black markets would explode because gov put restrictions on many goods and services;
outside goods may be better than domestic goods and will be offered on black market
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An economy that allows goods and services to be traded freely on an open market
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Ex: US/Singapore/Switzerland
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This allows options
for consumers and keeps business owners on their toes
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°freedom of choice


DISADVANTAGES:
° Factors of prod not employed if not profitable, but might be necessary to produce some
goods even if not profitable
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Firms always trying to maximize profits, may ignore
external costs like damages to environment
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When firms and individuals are able to produce
and consume freely, it may make the rich richer and the poor may become poorer
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Ex: South Africa, France, UK
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° Government exercises strict control and regulation over private sector industries
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° Entire economic structure is subject to the planning of the government
° Government takes steps to provide social security and reduce inequalities
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°consumer sovereignty: goods are produced as per the wishes of the consumers
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DISADVANTAGES:
° no freedom to private sector in mixed economy because Government regulates private
industries through its various regulations and licensing
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SOUTH AFRICA’S MIXED ECONOMY
°Private property, private initiative, self-interest and market mechanism play important role
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State ownership of firms is serious issue
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°Freemarketeers call for less gov interference in private decision-making while others call
for more, particularly to combat poverty
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In pure market system, prices are
established through the market mechanism
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