GROUP 2
, BASIC TYPES OF ECONOMIC SYSTEMS
Generally, the economic system is categorized into five, namely, capitalism,
socialism, communism, mixed economy, and traditional economy.
In this book, discussion is limited only to the common characteristics of the
identified and most popular economic systems.
1. Capitalism. This system is characterized by private ownership and control of
most resources (i.e. land, and capital) in order to maximize its utilization. It
relies on the decisions made in the market between the buyer and the seller
with very little or sometimes no government intervention. This decision is
popularly referred to in Economics as "laissez faire", a French word meaning
"leave alone" policy. Under this policy, the transaction between the buyer and
the seller is not dictated nor controlled by the government.
The price of the commodity depends on how much the seller is willing to sell
and how much, on the other hand, the buyer is willing to pay for it. Price is
determined by quantity of supply available in the market and demand of
, buyers. For example, a price of a commodity becomes higher or becomes more expensive when there is less supply available in the
market than what buyers intend to buy or when demand is high. But when available supply is more than what buyers demand, then price
of the commodity becomes low or becomes cheaper. The objective of the capitalist system, generally, is to maximize profit, that is, by
selling more commodities at a higher price, while producing commodities at a lower cost. This is achieved through efficient management
or proper use of productive resources.
The United States of America and Canada are typical examples of capitalist countries. The economic system in the Philippines is
patterned also from these capitalist counties.
2. Socialism. An economic system which allows the government to manage and control the major and key industries, while the rest are left
for the private to manage or acquire is Socialism. Nations classified as socialist are generally democratic with multi-party political system.
In this type of economic system the administration of resources and decision-making are highly centralized, that is, no movement in the
economy can be expected unless there are directives or policies coming from the economic authorities, or from the government.
Government planners decide what goods will be produced and also set the prices at which they are to be sold. Thus, the overall
performance of the economy under the Socialist system depends on how effective and efficient are the government officials or
authorities. Being centralized, the government is the one that gives regulations, directions and policies to be observed and implemented in
all economic and political related activities.
Socialist economy is based on the principle: "production for use", which means that the produce of the economy are for the consumption
and satisfaction and for the common good of the majority, and not to accumulate excessive wealth or to maximize profit.
Some countries with socialist ideologies (blog.peerform.com):
1.Denmarks 2.Finland 3.Netherlands 4.Norway 5.Belgium
, BASIC TYPES OF ECONOMIC SYSTEMS
Generally, the economic system is categorized into five, namely, capitalism,
socialism, communism, mixed economy, and traditional economy.
In this book, discussion is limited only to the common characteristics of the
identified and most popular economic systems.
1. Capitalism. This system is characterized by private ownership and control of
most resources (i.e. land, and capital) in order to maximize its utilization. It
relies on the decisions made in the market between the buyer and the seller
with very little or sometimes no government intervention. This decision is
popularly referred to in Economics as "laissez faire", a French word meaning
"leave alone" policy. Under this policy, the transaction between the buyer and
the seller is not dictated nor controlled by the government.
The price of the commodity depends on how much the seller is willing to sell
and how much, on the other hand, the buyer is willing to pay for it. Price is
determined by quantity of supply available in the market and demand of
, buyers. For example, a price of a commodity becomes higher or becomes more expensive when there is less supply available in the
market than what buyers intend to buy or when demand is high. But when available supply is more than what buyers demand, then price
of the commodity becomes low or becomes cheaper. The objective of the capitalist system, generally, is to maximize profit, that is, by
selling more commodities at a higher price, while producing commodities at a lower cost. This is achieved through efficient management
or proper use of productive resources.
The United States of America and Canada are typical examples of capitalist countries. The economic system in the Philippines is
patterned also from these capitalist counties.
2. Socialism. An economic system which allows the government to manage and control the major and key industries, while the rest are left
for the private to manage or acquire is Socialism. Nations classified as socialist are generally democratic with multi-party political system.
In this type of economic system the administration of resources and decision-making are highly centralized, that is, no movement in the
economy can be expected unless there are directives or policies coming from the economic authorities, or from the government.
Government planners decide what goods will be produced and also set the prices at which they are to be sold. Thus, the overall
performance of the economy under the Socialist system depends on how effective and efficient are the government officials or
authorities. Being centralized, the government is the one that gives regulations, directions and policies to be observed and implemented in
all economic and political related activities.
Socialist economy is based on the principle: "production for use", which means that the produce of the economy are for the consumption
and satisfaction and for the common good of the majority, and not to accumulate excessive wealth or to maximize profit.
Some countries with socialist ideologies (blog.peerform.com):
1.Denmarks 2.Finland 3.Netherlands 4.Norway 5.Belgium
