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Economic Systems - free markets and mixed economies.

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Introduction

Economic Systems - An economy is a management of resources in which people make/produce goods and services. There are three different economic systems that are present, with every economy being categorised into one of these systems. These systems differ depending on their answers to the economic problem - which includes the questions what to produce? How to produce? And who gets the product? In a free-market economy, the economy is extremely capitalist and is dominated by the private sector with great economic freedom. It gives the people the power and choice to spend the money that they earn. The government is neutral in the market and therefore, this economic system receives minimal intervention and regulation, which allows the decision of the producers and consumers to answer the basic economic problem. The needs of the public are provided by the firms, which are based solely on supply and demand. ...read more.

Middle

People are able to benefit more as a whole but they may also be liable to be affected by the many disadvantages within the planned economic system. This includes suffering from a shortage or poor-quality of goods and services, and this is because it is the government who takes charge throughout every stage of the production process and what the government wanted does not resemble what the general public wanted. Another reason is that the tightly regulated firms have no initiative to do a good job because they were restricted to making profit. Being the opposite of a free-market economy, it is the government (and not private corporations) who decides on the allocation of resources and it is them who answer the basic economic problem. Firms in this type of economic system will produce solely on the orders of the government and what they want, this is contrasting because production is based on supply and demand, under the private sector in a free-market economy. ...read more.

Conclusion

I think that the disadvantages of a mixed economy depend on which extreme it tends to lean towards. For example, a disadvantage of a mixed economy that is more close to a planned economy might be the high tax rates that the people receive or the lack of economic growth, but if it is an economy that is considered to be more free-market, there may be the need for more government funding to areas such as social welfare. There are also some disadvantages of a mixed economy in general. Businessmen will have their own markets for production because there is some government activity within the economy, they might also find it hard to pay the taxes, which are higher to those of a free-market economy. In a long term, mixed economies usually have more government intervention, some of which are unnecessary, this may cause the economy fluctuate as a result from time to time because of the lack of coordination between both the private and public sector due to the monopolies of both the government and corporations. ...read more.

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