Introduction to economics Assignment Example | Topics and Well Written Essays - 1000 words

Introduction to economics - Assignment ExampleIn this way, economic power is widely dispersed. But in a intend or command frugality, resources are publicly owned and economic decisions are made through commutation economic planning. This is because a central planning climb on determines major economic decisions. In free securities industry economy, the individual freedom is valued and motivation comes from each agents self-interest in maximising their income through individual decision-making. Buyers can freely choose what goods and services to purchase and at what price musical composition sellers can freely decide what goods and services to produce and in what quantity. As to a planned economy, stage business firms are owned and controlled by the political science, so they produce according to the central planning boards directives. Free marketplace economy is an economic system in which trading and exchange of goods, services and knowledgetakes place in a free market (Ec onomywatch.com 2011, par.1). This means that under this economic system, markets are head by the invisible hands. Law of supply and demand set market prices and all individuals in the economy have full knowledge about it. Individual decisions and preferences are communicated and coordinated through the mechanism of the market system. Government is kept from interfering within the economy as any interference whitethorn disturb the efficient functioning of the market system. Their role is limited to private property and making hold legal framework in which free market functions. The advocates of planned economy do not hold in with this as they see the market as imperfect and therefore they recommend government intervention to slouch market failures. Production targets for each firm are set by the central planning board including the amount of resources to be allocated. Even the distri hardlyion of output is determined and planned centrally. Both free market economy and planned ec onomy have their advantages and disadvantages. The Great Depression was being blamed to the imperfect market system and inefficient business cycle. So, the United States government tried to intervene in the economy but still the effects of economic recession in 2008 was felt by approximately of the economies in the world. Because of these, most economies of the world are applying the mixed economic system, mixing the characteristics of a free market economy with a command economy. Real world economies are arrayed between the extremes of free market and planned economy (McConnell and Brue 1993, p.31). The United States economy, for example, leans toward free market system which is basically structured with the principles of economic freedom but the government plays an active role in promoting economic stability and growth, in providing goods and services which are either underproduced or not produced at all by the market system and in modifying the distribution of income. While few command or planned economies before like China and India are now economically thriving after following the principles of market oriented economy system. This means that the mixed economy is more tributary to efficiency in the use of resources, stability of output and employment and rapid economic growth because eventide if the government has some level of regulatory control over the markets, the decisions are still left to the buyers and sellers in the