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Describe what is meant by an 'economic system'.

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Economics - 26/09/03 Q1) Describe what is meant by an 'economic system' An economy is a system to allocate resources there is a basic economic problem - there is scarcity to resources and wants are unlimited: There are 3 scopes to allocation: * What products is to be produced * For who it is meant to be focused at * How is this meant to be produced Economic systems are difficult networks of individuals, organisations, and their social and legal interrelationships. The 'actors' in an economic system are as followed: Individuals - they can be consumers or producers that might own factors of production which they supply for production purposes. Groups - trade unions, charities, political parties and families are just some of the type of groups you might find in an economic system. Government - The main thing that a government will try to do is to cut power from businesses, the scale at which this is set can be a group of people in a village or to a national or international parliament, and they will try to excise power by passing laws, by working out the connection between groups. ...read more.


There are 4 types of 'actors' in this economy: * Consumers * Producers * Owners (Land and capital) * The Government Motivation: Motivation in this economy is seen as self-interest from the actors. Consumers want to expand greatly on their self happiness or utility. Producers aim to maximise profits. Owners aim to maximise on wages, rents, interests and profits. The government on the other hand is guessed to be motivated by the public interest and not by self-interest. This would expand on social welfare. Private Ownership: Mostly all of the private individuals or organisations in a market economy own the factors of production. Rights of citizens is upheld by the government to own property, this is done through laws. Free Enterprise: All owners of factors of production, and all producers have the right to buy or sell through a market mechanism, the market mechanism was explained at the beginning part of this work (what? how? & for whom?) Labour can work where is wishes to work if there is job availability. People can set up there own businesses if they wish to its free to do so. Consumers can purchase what ever they wish to purchase that is available for them. ...read more.


would direct consumers what to consume, direct producers what produce and direct workers into jobs. The UK's public interest would be against this communist style of economy and would prefer to have a mixed economy. If motivation was lead by the workers, government and consumers then would be doing it for the common good rather than self-interest. I still believe that the UK should stay as a mixed economy although Tony Blair wants a 'stakeholder economy' where everyone should be interested in businesses. It is so there is less reliance on the government to provide the welfare of people i.e. pensions, health and employment. If Tony Blair would like to become more like the USA then were heading in the direction to becoming almost like a free market economy: 95% of the British receive medical treatment free, 5% have to pay whereas the USA, 95% pay for there medical treatment and 5% (under extreme cases) get it for free. So this puts my argument into a different limelight, I think people would prefer not to pay for their healthcare in the UK and so we would be shifted more towards the planned economy. To adopt a pure planned market economy has its advantages which we would have anyway with a mixed economy but there are many disadvantages, the UK is better of staying a mixed economy. ...read more.

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