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What is the economic system?How does Australia's economic system attempts to solve the economic problem?

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Alice Fisher Year 11 Economics Essay What is the economic system? How does Australia's economic system attempts to solve the economic problem? Answer: An economic system is a mechanism that deals with the production, distribution and consumption of goods and services in a particular society, composed of people, institutions and their relationships. The economic problem is what an economic system attempts to solve. There are several basic questions that must be answered in order to resolve the problems of economics satisfactorily. For example, the scarcity problem requires answers to basic questions, such as: what to produce, how to produce it, and who gets what is produced. An economic system is a way of answering these basic questions. The Basic Economic Problem is a term used in economic theory. It outlines that there are limited resources for infinite human wants and involves what goods and services an economy should produce, and where the emphasis on production should be such as public services, housing, agriculture or manufacturing. It also determines how the goods and services should be produced, capital or labour intensive and the efficiency. Wants and needs are virtually unlimited, because that the majority of goods are non durable, and new or improved products become available on the market, however, every economic system has a limited amount of resources at its disposal, known as the factors of production. ...read more.


This is the basis for right wing systems such as capitalism, due to its basis around free enterprise and capitalistic ideals, where the majority of the factors of production are controlled by the private sector. Secondly, the Welfare State Economy, a left wing, socialist inspired economy in which the key aim is to provide all individuals a fair distribution of the basic resources necessary to maintain a good standard of living. While the market, in today's modern welfare state, can, and often does retain some level of private ownership, the Government enacts broad programs of social welfare, such as pensions and public housing, and retains a larger degree of control that a mixed economy. A completely communist state is rare in the modern economy, with few remaining, and most ostracised by the wider world community, such as North Korea, however, there a numerous majority welfare state nations such as Sweden, in which taxation is extremely high but Government services are some of the best in the world, and another form of welfare state, Saudi Arabia, in which a large majority of all commodities are owned by the king. Thirdly, the mixed economy, on which Australia and the United States are both based around. ...read more.


Professionals may see better business opportunities within the realm of private practice. Certain individuals may want a higher quality level of good or service than is available from government regulated institutions and may not have a choice or freedom to choose, despite their ability to afford a higher rate. In a welfare state, corporate structure can also be more heavily regulated leading to less corporate greed. An adverse example would be that of the Enron case which left hundreds of employees without a retirement fund. If regulated under state control, the regulations would prevent the degree of which the company heads were allowed to progress, thereby protecting the rights of individuals. However, government interventions doesn't ensure a lack of corruption, one only has to look at the recent Australian Wheat Board Scandal, and its detrimental effect on the Current Account Deficit to realise that government intervention can further corruption rather than controlling it. The mixed economy is widely viewed to be the most successful in solving the economic problem, however, every mixed economy has some sway to either the welfare state or the market economy, never creating the perfect balance between the two, resulting in an unbalanced economy. So far there has been no economy to perfectly solve the economic problem, however, the changing nature of the Australian Economy has assured that it remains stable. ...read more.

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