Answer to Question #123998 in Microeconomics for derick

Question

describe any two economic systems and their functions on distribution of goods and services

Answer 1

The economic system is an organization of the economic life of a society based on a certain structure of interconnections between economic agents.

The type of economic system depends on the prevailing economic goals in society, forms of ownership and methods for solving economic problems.

As noted in Economics by K.R. MacConnell and S.L. Brew "... the industrially developed countries of the world mainly differ in two ways: 1) in the form of ownership of the means of production; 2) in the way by which it is coordinated and driven by economic activity "

A market economy is an economic system based on the spontaneous coordination of economic elections. This type of economic system is characterized by free enterprise, pricing based on the interaction of supply and demand, the predominance of private property. The market system answers the fundamental questions of economics as follows. Firms produce those goods and services that are in demand. Goods are manufactured using technology that can minimize costs. Goods and services are produced by those economic agents that have advantages in the production of this product. One of the advantages is the possibility of minimizing costs. And finally, goods are produced for those who have sufficient income. People without income find themselves outside the process of consuming goods. In a market economy, there is a private form of ownership of resources and final goods and services.

The command economy is an economic system, the main role in the regulation of which is played by the state. In this system, the state determines what products and in what quantity should be produced, for whom to produce and how to produce. Why does the state play the role of the main regulator in the economy? Because in this economic system state ownership prevails over all the basic means of production, that is, the bulk of the economic resources are owned by the entire population living in the country. On behalf of the population, the state also controls the distribution of all basic economic resources, as well as their use. Due to the insignificant share of private ownership of the means of production or its absence in the command economy, there is no market. It is replaced by central planning, distribution, and procurement. However, there are elements of the market. Manufactured products are considered goods, but the prices are set by the state.

A mixed economy is a type of economic system based on a market pricing mechanism, but involving government intervention in economic relations. In modern conditions, a combination of two types of economic systems — market and command — finds more and more place. This allows you to use the advantages of these systems and, to some extent, neutralize their shortcomings. There are countries in which the market-based regulatory mechanism prevails, and state ownership, like government intervention in the economy, plays a less significant role. These include the United States and many countries of Western Europe.