• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

free-market economy and central planned economy.

Extracts from this document...

Introduction

Economics Essay T1- What are the main characteristics of a free-market economy and central planned economy. T2 - Evaluate the possible consequences that may be in counted when an economy makes a transition from central planning towards a free market. . Task 1 An economy may be defined as the state of a country or region in terms of the production and consumption of goods and services, and the supply of money. A planned economy is an economic system in which economic decisions are made by centralized planners, who determine what sorts of goods and services to produce how they are to be priced, and allocated. Since most known planned economies rely on plans implemented by the way of command, they have become widely known as command economies. These are generally associated with socialist or communist economic systems. A free market economy is an economy in which the allocation for resources is determined only by their supply and the demand for them. Every economic system is based on a different philosophical stand than the others. These differences are caused by the different responses that each economy has to the problem of scarcity. However, economies don't always work as their theoretical models and take some components from each system to develop an economy that works. Thus, economies are graded as being free market economies or planned economies using a tool called the economic spectrum, where the planned economies are placed on the left and the free market economies on the right. ...read more.

Middle

growth rate was nearly stagnant, growing by only 0.2 percent, consumer prices had risen by 250 percent, and real wages increased by a mere 9 percent. In view of the economic situation, the new government introduced radical measures that were intended to stabilize the economy and encourage the development of a free market. The country's much publicized "shock therapy" had begun. There was massive a cut down in government spending, private enterprise was allowed and the government sat back and watched. Initially the inflation rose and the situation seemed to be worsening, when entrepreneurship and the laws of supply and demand kicked in, and the free market economy began to materialize. In 1990-91, Poland experienced a deep recession throughout which GDP decreased by almost 20 percent, the demand for labour decreased, and unemployment increased. During the first 3 years of the nation's transformation, both the State sector and the cooperative sector lost 4.6 million jobs, while the flourishing private sector created 2.6 million new jobs. In 1992, the number of unemployed reached 2.8 million, of whom 80 percent had been previously employed. Since 1992, Poland has experienced annual economic growth ranging from 3 percent to 7 percent; correspondingly, inflation decreased from 585 percent in 1990 to 11.8 percent in 1998. Employment has increased, unemployment has begun to decrease, and real wages have risen once more ( as they say things get worse before they get better). The GDP growth rate witnessed an extreme rise. ...read more.

Conclusion

Consequently, even in the face of the economic slowdown, the Polish central bank imposed a deflationary policy, with high interest rates aimed at stabilising the value of the currency, the zloty. Obviously, this had further negative effects in terms of lower exports and greater import penetration. Since then, economic growth has slackened to the point where it was only 1 per cent last year, and the growth is expected to be even less this year. Poland has experienced a surge in the tourism industry. It has opened up to foreign investors and found itself a place in the global economy. Poland has also opened up to Western media and publications which has increased its global awareness but also brought with it pornographic content. Under the command economic system, Poland's natural resources were fast depleting and suffering from contamination, rendering them useless. The transition to free market has lead to greater environment awareness and steps have been taken by the Polish government towards rehabilitation of the environment and protection of the natural resources. Certainly, the free market principles have not delivered the rosy picture they painted to Poland. Poland has paid an extremely high price for a liberal economy, one it continues to pay; but the situation has improved from what it was under a command economy, and though it's not a desirable condition, it is the lesser of the two evils. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Extended Essay

    The latest government proposal in regard to these problems eliminates higher subsidy price for the needy. This system is more effective than the previous one, as it better supports those with lower incomes. Socially, it is more equal. However a more effective system would be extensive price discrimination, introducing different

  2. Allocation of Resources

    Therefore, the market equilibrium, where demand meets supply, is also where marginal social benefit meets marginal social costs. At this point, net marginal social benefit is maximized, meaning this is the allocatively efficient outcome. If a market or firm is not Pareto efficient, then it cannot be allocatively efficient.

  1. Strategic and Operational Performance Assessment at Petrom

    to 4 mn litrs/year; * New highly frequented locations, the new design and enhanced service quality supports the 38% total market coverage; * The introduced full agency concept thrives towards a higher service level in both oil and non-oil business; * Total marketing investment of EUR 0.45 bn until 2011;

  2. Economics Extended Essay - To what extent has the market for paintings in South ...

    These conditions made the art market worthy of investigation. Paintings of similar artists have similar prices so the price of a specific type of paintings can be averaged. Galleries also record exactly how many paintings of each type are sold.

  1. The luxembourg Economy (Complete Review)

    This increased purchasing power and capability to satisfy desires is a leading factor giving Luxembourg a great quality of life. Although these social and economic indicators may be high, GDP and national income are only a few factors influencing living standards.

  2. Pro Free Trade

    productivity rose, as a whole, by 0.6% annually, and by 2.1% in the most affected areas (industries with high tariffs). Innovation also thrives in free trade, as to be better than your competitor, sometimes you have to offer a better product.

  1. Protectionism and Free Trade

    and higher prices. With free trade the government is able to compare the quality and the price of the goods produced in foreign countries, enabling it to improve the standards so to compete against the international market and optimize its goods to a higher standard.

  2. Use a diagram to show the consequences of government imposing a price above or ...

    As supply contracts and demand extends, the rent control act creates a shortage of rents. This would lead to homelessness, as people cannot find homes to live in. Although the rent control act denied access to the migrants, it protected the people that are already housed in Mumbai.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work