Economic Systems Term Paper

Pages: 4 (1491 words)  ·  Bibliography Sources: 2  ·  Level: College Freshman  ·  Topic: Economics

SAMPLE EXCERPT:

[. . .] Resource allocation issues in market or free enterprise economic system are addressed without any governmental intervention and determined by demand, supply, and competition ("Economic Systems" p.1). Furthermore these issues are handled by the unfettered interaction of individuals and firms in the marketplace that determine Resource allocation and distribution of goods. While governmental intervention is minimal in this economic system, the government plays certain roles such as enacting appropriate laws, issuing money, and providing certain services.

Mixed Economic System:

This economic system can be described as an economy with a combination of command and market economic systems to provide goods and services for the benefit of all individuals. Therefore, a mixed economic system is an economy with a mixture of private and government ownership. The main characteristics of this economic system include the fact that most economic decisions are made by people in the market. Secondly, the government intervenes in the economy when necessary in order to ensure market efficiency.

The government intervention shows the critical roles it plays in this economic system such as preventing monopolies, increasing minimum wage, and providing welfare. Furthermore, the government ensures price stability, high level of economic growth, and balances exports and imports. Resource allocation issues are addressed by both individuals and government based on their roles in the allocation and distribution of these resources.

Factors of Production:

There are four generally recognized types of factors of production i.e. land, capital, entrepreneurship, and labor. Land primarily extends to all natural resources associated with the production of goods and services. Land is categorized as a factor of production to demonstrate the contribution of non-human resources to production in their original, unimproved form ("Factors of Production" par, 3). This factor of production is particularly important in the productions of agricultural goods though it's also valuable in non-agricultural production processes. For instance, the government raises taxes on land as a means of increasing its revenue base in order to enhance the production of goods and services in other sectors.

The second factor of production is labor, which can generate surplus over subsistence costs across various industries at prevailing prices. Labor is a major factor of production since it's the means with which individuals and businesses obtain profit. For example, the ability to make profit from production of agricultural goods and services is nearly impossible without labor from workers. Therefore, the main role of labor in production of goods and services is that it's the key to making profits. Third, capital is a factor of production that covers all finances used to begin and carry out production processes and activities. In most cases, capital has been considered as finances used to purchase equipment for business activities. Capital plays a significant role in the production of goods and services since it the means with which these processes and activities are started and sustained. For instance, capital is used to purchase raw materials that are processed into finished products for use by customers. The final and recently added factor of production is entrepreneurship, which is considered as the ownership of capital. The entrepreneur is the manager or risk-taker who channels his/her finances or ideas into the production of goods and services ("Factors of Production" par, 15). Furthermore, entrepreneur acts as the innovator who seeks for new ways of creating a product or services or transforming an old product or service into a new one. For instance, a business may employ the services of an entrepreneur to improve the firm's brands in order to meet the ever-changing consumer demand.

Conclusion:

Economic systems are set of principles and guidelines that influence the production, allocation, and distribution of goods and services. There are different types of economic systems that have been developed to deal with the challenge of scarcity such as traditional, market, command, and mixed economies. The type of economic system is determined by the decisions and ways taken to produce, allocate, and consume product and services. However, the production of goods and services is also affected by various factors of production including land, capital, entrepreneurship, and labor.

Works Cited:

"Economic Systems." Hilliard Bradley High School. Hilliard Bradley High School, n.d. Web. 18 Mar. 2013. .

"Factors of Production." Enotes.com - Study Smarter. Enotes.com, Inc., n.d. Web. 18 Mar. 2013. .

"Types of Economic Systems." Economic Systems. Shmoop University, Inc., n.d. Web. 18 Mar. 2013. . [END OF PREVIEW]

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