There Are Different Types of Economic Systems, How Each of These Types Deals with the Economic Problem?
There Are Different Types of Economic Systems, How Each of These Types Deals with the Economic Problem?
There are different types of economic systems, ranging from the centralized command system (U.S.S.R.), to the free market economy (U.S.A.).
Economies nowadays are mixed in nature than in the past, with a trend leaning more towards a free market system since the demise of the former Soviet Union and the European eastern block.
Hence China has since revised its policies and is opening up the market to avoid the same fate.
The USA free market has also been recently learning that a totally free market “laissez-faire” may also need some corrective government interventions to resolve problems such as the sub-prime mortgage crunch that recently hit the real estate markets in the US.
The economic problem of all societies is the scarcity of resources in relation to the wants.
Thus the opportunity cost of a producing a certain product is the negligence of another product.
This also applies to the consumer, by choosing to buy a certain produce is missing on buying another product.
In a utopian society all producers direct their production efforts towards producing the most beneficial produce to society, and the consumer is buying the most useful produce/service. This would lead the economy to reach its Production Possibility Frontier.
A free market system is an economic system where there is a democracy directed by the dollar votes of the consumer. This is good in some parts of the world, while it may be a curse for other poor, uneducated societies. Poor, uneducated citizens may make the wrong choices and thus waste the already famished resources. An example is apparent