The modern business world has been transformed to another new level with the current economic system mind developed by most of the business manager. It is quite significant to see how over the years this has increased the profits and the surplus of the products giving an advantage of efficiency and management of the businesses. In a nutshell, economic system map can be defined as the strategic means by which a government or a country strategically follow to distribute its valuable resources as well as trading of its goods and services. Through this, the five factors of production, which entails entrepreneurship, capital, labour, information resources and the physical resources are well adhered to.
Planned economic system
In this type of planning, the government has the mandate of controlling all the aspects of planning where most of the activities and major functioning are conducted by the federal government. For example, the government may decide who owns the business, whom to be the potential buyer of the products, as well determining who gets to make certain decisions and who works for them. Communism is an example of the planned economic system where all the planning activities are left in the hands of the government.
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The best part of this type of economic system is that the government has the mandate of regulating and directing the growth of the economy. Through this, the government can balance different units in the system to ensure that it has a balanced economic system.
This type of economic system may be termed as a dictatorial where the government has all the legal right and means of controlling the final aspect of the economy.
Marketing economies
The market economies, people, have the freedom of making their own choice in the market. The market contributors have the opportunity to choose from a vast of choices which entail most of the companies using the factors of production in the form of their desire. An example of this form of the economy is the capitalism.
The side effect of this form of economy is that most of the countries greatly venturing into this type of economy face an imbalance form of economic growth. Most of the businesses and potential entrepreneurs will venture into more cheaper market, leading to a concentration of a group of companies heavily venturing on one side of the business.
The economic system we have in the United States
The United States uses the capitalistic system form of economy to ensure that there is no gaps or unattended units in the State to ensure that the citizens are fully attended. In this case, the government gives the mandate to entrepreneurs to enjoy the freedom of their investment choice.
Explain why it is essential to have an economic system
There is a great need to understand the main reason to why economic system is so important. To begin with, every nation for decades have greatly struggled with the issue of the economic growth. It is quite significant to note that the growth of economy plays a vital role to ensure that all the citizens maximumly benefit from all the angle. In a nutshell, the economic system plays a planning role in all the activities of the nation, from sources of production to even a more sophisticated step of ensuring that we get what we want.
More simply, the economy plays a vital role in ensuring that demand and supply of goods and services are well achieved and fulfilled. Through this, the government has a mandate of providing that all the resources are channelled in the right manner.
