There are three types of economic system:
- Free
Market Economy: in a free market system all decisions
regarding the production of goods and services are made by the citizens of
a country with very little interference from the govern 818b12i ment. The market
laws of supply and demand dictate which goods and services are produced.
On the negative sides, the wealthier sectors of society hold most of the
economic and political power.
- Centrally
Planned Economy: All decisions regarding the
production of goods and services are made and controlled by the state.
Government officials decide what goods to produce, how to produce them, to
whom they should be distributed and at what price they should be sold.
- Mixed
Economy: This
is a combination of two systems. In most area, citizens are free to set up
businesses to produce goods and services. The mixed system have the
disadvantages of both the free market and centrally planned system.
The factors of production are: " Land, labour,
enterprise and capital".
- Land:
refers to the
natural resources available in a country;
- Labour: refers to the people available
to assist in the production of goods and services;
- Enterprise is the act of bringing together elements
of land, labour and capital to develop with a view to making a profit;
- Capital: refers to the money invested
to run a business.
We have basic needs to survive: food and drink, shelter and clothing but we have
also an unlimited numbers of wants.
Our needs and wants create the opportunity for business.
To keep the economy turning, businessmen
continually invent new "wants". When a product is successful, designers try to
add new features that will make people want the newer model.
We live in a consumers society where the
consumption of mass-produced goods is encouraged through mass communication.
