Global Economic System

The global Economic system refers to the economic activities taking place across the globe, interconnected and between several nations. It is the exchange of goods and services that takes place between nations. Through global economic systems, countries have been able to specialize in the production and offering of services that they have a competitive advantage. The advancement of the global financial system has led to the creation of three main types of systems. The techniques include the market, command, mixed economies. For the relevant realization of opportunities in the structure, it is necessary to know the differences present in the three economies. The three system affects the level of utility of the consumers and the behavior of the management. The essay will focus on the global economic system and provide a clear elaboration on one method. 

Command economy is one example of a global economic system. Just as the name "command" suggests, there is the domination of one organization is the market that gives orders to the rest. A command economy is like a monopolistic organization that controls the prices and the supply of goods and services. In a command economy, the monopolistic organization is the government (Luthans and Doh, 2018). The goods and services present in the command economy do not aim to satisfy the consumers' level of utility. Instead, the focus is on the theoretical advancement of the community at large. Almost all countries worldwide are affected by the actions that may appear not related to the nations. The influence is a result of the global economic system and particularly the command economy. For the effective establishment of a command economy, there is a need for an organization to gain a competitive advantage. 

If an organization gains a competitive advantage, it will not only be monopolistic and control the operations in the market but also reduce its overall manufacturing expense. A decrease in the cost of producing their goods means they are at liberty to manage their commodity prices and other companies' economies. The ownership of all the states in the command economy is under the government. The aim of such a type of license is for the government to control all their operations by making sure that their actions are following their aims and objectives. May nations have challenges with the monopolistic economy as the outcomes are not always what they expect. For instance, a country that controls domestic products' price usually faces a challenge in the results due to the variation is the preference and taste of the consumers. The marginal propensity to consume is different for each consumer. 

When the disposable income of individual increases in the command economy, their spending will equally increase. Hence, they might be willing to pay much higher prices for commodities that satisfy their utility than the government sets as the standard price. The same is applicable if the disposable income decreases as they will not be willing to purchase commodities at the price set by the government. The management style in the command economy does not put into consideration the demographic factors. The European Union is one example of a trade bloc that predominantly uses a command economy. They try to create a monopoly in the market by eliminating barriers between all the member countries. There is the unification of the custom duties and industries operating within the various trade blocs with the absence of obstacles. The European Union also establishes a monopoly by using a single currency and having one regional central bank (Luthans and Doh, 2018). The set-up is advantageous since nations with a competitive advantage in producing high-quality goods, and low cost can ship them to any country in Europe. 

The outcomes of the EU control are not always as anticipated due to other factors such as culture. There is cultural variation in all the countries in Europe. Culture mainly affects the acceptance of a commodity in the market. The communist community is the leading adopters of the command economy as it determines their income and options for investment. Examples of counties that have the command economy include Cuba and North Korea. China had the command economy at the start but later transitioned into a mixed economy. The change in the economy is because their society has a mixture of both the communists and the capitalists. The main challenge that the command economy faces is low innovations from the managers and workers since the economy is under the state's ownership. In the economy, the main argument is that fair distribution of goods and services is better than private profits. Thus, the economy's primary concern is individuals' social welfare through ensuring that they receive the goods and services at a much affordable price. The resources are allocated towards ensuring social welfare is at its maximum. The maximization creates the difference between the command economy and the other global economic system. The focus of the other methods, such as mixed and market economy, is to maximize the profits and the concern is not of the consumers' social welfare. 

Reference 

Luthans, F.& Doh, J. (2018). International Management: Culture, Strategy, and Behavior. (10 th ed.). New York, NY. McGraw-Hill Education. Print.