商业环境Chapter 5B Economic Systems.pptVIP

Different Economic Systems (p137-149) Chapter 5B What is Economics? Economics is a social science that studies how society manages its very limited resources. Scarcity – shortage of resources Vs. unlimited human wants Economic Systems(p139) Classifying economic systems classification by degree of government control Economic Systems(p142-143) The features of command economy State owns and controls the main economic resources planning Investment (priorities in the use of resources) Sets output targets Distribution of output Amount consumption Price Advantages of a command economy High investment in public sectors Guarantees equal standard of living for everyone Less crime and poverty low unemployment Economic Systems Problems of a command economy Lack of investment in private sectors No incentive to produce better product or engage in entrepreneurship problems of gathering and coordinating information Minimal choices of consumption and black market No incentive to produce better product or engage in entrepreneurship loss of individual liberty eg: choice of occupation Economic Systems (p138-141) The free-market economy Resources are in private ownership and free decision making by individuals and firms Firms seek to maximise profit and free from state interference Consumers seek the greatest benefits for least cost No master plan exists to direct production and consumption the price mechanism shortages and surpluses shortage ? price rises surplus ? price falls equilibrium price where demand equals supply response to change in demand and supply “Pure Market Economy” The Free-market Economy Advantages of a free-market economy transmits information between buyers and sellers no need for costly bureaucracy incentives to be efficient and innovative for profits competitive markets respond to consumer wishes and demand Problems of a free-market economy / Market Failures Existence of imperfect market Externalities Certain commodities Merit goods Public goods Purpose of stra