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Economic System: Economics

This document discusses different types of economic systems - capitalism, socialism, and mixed economies. Capitalism is a market economy where private individuals own production for profit. Socialism is a planned economy where the state owns production for social benefit. A mixed economy combines elements of both through public and private sectors cooperating under government oversight.

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Rohit Agarwal
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65 views

Economic System: Economics

This document discusses different types of economic systems - capitalism, socialism, and mixed economies. Capitalism is a market economy where private individuals own production for profit. Socialism is a planned economy where the state owns production for social benefit. A mixed economy combines elements of both through public and private sectors cooperating under government oversight.

Uploaded by

Rohit Agarwal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Economic System

Economics
Economics is the social science that analyses the production, distribution
and consumption of goods & services.

Economic System
Economic system is the system of production, distribution and
consumption.
An Economic system is a mechanism, which deals with production,
distribution and consumption of goods and services in a particular society.

Economic System is an Organized way in which a state or nation allocates


its resources and distributes goods and services in the national
community.

TYPES OF ECONOMIC SYSTEM

Capitalism (MARKET ECONOMY)


Socialism (PLANNED ECONOMY
Mixed Economy (CAPITALISM + SOCIALISM)

CAPITALISM
Capitalism is an economic system in which the means of production are
privately owned and operated for profit, usually in competitive markets.
In other words; An Economic system in which investment in and
ownership of the means of production, distribution, and exchange of
wealth is made and maintained chiefly by private individuals or
corporations.

FEATURES

Right to own property.


Profit motive.
Private ownership of means of production.
Consumers Sovereignty.
Economic Freedom.
Social division of people.
Price Mechanism

Advantages and Disadvantages

Advantages

Reduction in cost of production due to efficient control.


Efficient control of production process.
Improved Quality of goods.
Consumers Choice is given full weight.
Varieties of products.

Disadvantages

Inequality in the distribution of National Wealth.


Fluctuations in the level of employment.
Class conflicts.
Waste of Talents.

Heavy expenses on publicity result into increase in cost and price of


the commodity.

SOCIALISM
In Socialist Economic system, the production is owned and managed by
the state. Ownership of means of production is not allowed. In Socialism,
Economic activities are carried on mainly for social gains and personal
interest is of less significance. Economic activities are planned with the
motive of social benefit by a central planning authority.
Socialism is a term applied to an economic system in which property is
held in common and not individually, and relationships are governed by a
political hierarchy.
Primary goal of Socialism is social equality and distribution of Wealth
based on ones contribution to society and an economic arrangement that
would serve the interests of society as a whole.

Features of Socialism

Social Ownership of means of production.


Existence of public sector.
Decisive role of Economic Planning.
Production guided by Social Benefits.
Absence of Competition.
No Economic freedom to the people.
Economic activities are planned by the Central Planning Authority.

Advantages and Disadvantages

Advantages
Greater Efficiency.
Greater Welfare.
Absence of monopolistic practises.
Absence of Business Fluctuations.
Economic Growth.
Eliminates Poverty

Disadvantages
Elimination of Individualism
Consumers suffer.
Economic Equality
Non-existence of economic and political freedom.
Non-Existence of Competition

Difference between Capitalist Economy and Socialist Economy

MIXED ECONOMY

An Economic System that features characteristics of both Capitalism and


Socialism. A Mixed Economic system allows a level of private economic
freedom in the use of capital, but also allows for governments to interfere
in Economic activities in order to achieve social aims.
This system overcomes the disadvantages of both Capitalism and
Socialism.

Features
Resources are owned both by the government as well as private
individuals. I.e. Co-existence of both public sector and private
sector.
Market forces prevail but are closely monitored by the govt.
Monopolies may be existing but under close supervision of the govt.

Advantages and Disadvantages

Advantages

Producers and Consumers have sovereignty.


Adequate Incentive to work hard.
Interest of the people is well served.
Resources may be properly utilized.
Rapid Development is possible.

Disadvantages
Concentration of Wealth in few hands.
Existence of anti-social activity.
Wastage of resources

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