Essentially, economic systems play a crucial role in the performance of business at all levels, and it is characterized by policies and enties. Economic systems encompass the aspects of distributing resources for trading and cover the mechanisms of production such as labor, capital, among others. The most famous forms of economic systems include planned and free market systems; however, in most countries prefer mixed economic system. Notably, the system is managed by the government of a country in most cases, and this varies from state to state. In this form of regulation, the government determines and controls what to produce, how to produce and most importantly how and from where to produce. The systems are also categorized into various categories such as; traditional, command economy, market economy, and the mixed economy system.
Significantly, the regulations and dynamism in the above economic systems affect the running of any business in several ways. Firstly, it is important to note that economic systems affect business operations in a twofold way. Initially, the control government’s role in regulating the activities in the system implies that the government solely makes decisions on the market operations solely. This being the case, it means that business do not have that liberty or freedom to make crucial decisions; this drags back development. An instance is evident on how the federal government gets involved in regulating production and market dynamics in the United States through licensing and issuance of permits before commencing any business (Ghisellini et al. 2016).
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In conclusion, it is realizable that economic systems and the regulation positively ensure that there is market stability for the smooth running of the business. Secondly, it is notable that economic systems provide structure policies and how the capital market is planned or organized to achieve a prosperous business environment. In the same line, it is evident that economic system fundamentally ensures business growth and business equality and the direction of financial and currency flow to have control of the available resources.
References
Ghisellini, P., Cialani, C., & Ulgiati, S. (2016). A review on the circular economy: the expected transition to a balanced interplay of environmental and economic systems. Journal of Cleaner Production , 114 , 11-32.
