Economic Systems And The Economic System

808 WordsSep 29, 20164 Pages
Throughout homo sapiens evolution tribes managed resources the most efficient ways possible (given their acute primitiveness). For those thousands of years as tribes, they expanded their intellects and became less self-reliant, moving away from hunting and gathering. Humans started to invent new technologies that made their lives easier; thus, individuals specialized in producing or providing these goods and services to fellow tribe members. As they cultivated ever more superior technologies the standard of living grew. This gave way to exponential population growth, towns, cities, kingdoms, and empires were established. Macroeconomics arose as societies devoted time and energy into governing their factors of production and maximizing…show more content…
In addition, the buyer and seller consider their own personal gain when exchanging, thus, self-interest is the motivating force in the free market. The struggle among producers for the dollar of consumers is competition; it is the regulating force behind the free market. Competition pushes businesses to produce goods of higher quality and moderate their desire to raise prices. To summarize, the free market elevates the standard of living, economic efficiency, economic freedom, and economic growth. Nevertheless, a free market system’s shortfall is that it cannot achieve economic equity and economic security easily. Consequently, the centrally planned economy exists to achieve the weaknesses of the free market. In a centrally planned economy, the government, rather than individual producers and consumers, answers the key economic questions. The government controls all factors of production and directs workers to produce a certain number of goods. Command economies oppose private property, free market pricing, competition, and self-interest. However, command economies do not perform well in practice, lacking logistics to coordinate an entire economy, reducing efficiency and economic growth. Thus, countries with central command are going through an economic transition into mixed economies. Mixed economies are a market-based economic system in which the government is involved to some extent; the government

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