Ecnomics Essay Example | Topics and Well Written Essays - 2250 words

Ecnomics - Essay ExampleThis universal phenomenon leads to the definition of economics as the science of allotment of scarce resources. To understand more clearly, lets understand that we have three factors of resources that atomic number 18 necessary to for production process as described in (Sloman 2006, p. 4) Human resources labor. The labor force is restrict both in number and in skills. Natural resources write down and raw materials. The worlds land atomic number 18a is limited, as are its resources. Manufactured resources or capital. Capital consists of all those inputs that have themselves been produced in the beginning place. The world has a limited stock of capital a limited return of factories, machines, transportation and opposite equipment. The productivity of capital is limited by the state of technology. Hence, scarcity arises imputable to comparative unlimited compassionate wants in the limited set of available resources to satisfy these wants. In other words, in free market economy scarcity occurs either because of increase in gather up or decrease in supply. Economics, deals with issues arises due to scarcity distribution of resources and products among individuals or societies, regions or countries of the world. Investorwords (2011) defines Free market placement as a system in which, Business governed by the laws of supply and demand, not restrained by political relation interference, regulation or subsidy, or a foreign exchange market that is not controlled by the government. also known as pure capitalist system where individuals are free to make their demand decisions. The decisions of consumers and firms pertaining to the demand and supply of goods are transmitted to each one of them via the effect of these decisions on expenses. This in turn, sets the equilibrium price level in the economy. Hence, prices are set via free interaction of demand and supply of goods and services, in a market where consumers are free to make the ir own choices according to their own income levels, firms are free to supply what they decide according to their own investment. The present world markets are likely to be known as mixed economies where minimal government interference to run the economic system exists with the help of businesses. United tell aparts, however, is a good manakin of free market system where government intervention is minimal and mostly prices are determined through market forces of demand and supply. Command system or planned economy is delimitate in investorwoods (2011) as an economy where supply and price are regulated by the government instead than market forces. Government planners decide which goods and services are produced and how they are distributed. The former Soviet Union was an example of a command economy. Command economies are usually recognizable in places where the presence of collectivist or communist systems of economy exists. It is in these economic systems that land and capital are collectively owned. State is the sole decision maker. It decides how to allocate resources for the future trends and also for the current ongoing requirements of the economic system. The State also governs the generation and distribution between customers of output from each industry and firm. In these centrally planned economies, the government could achieve high growth rates by allocating resources into investments and could minimize unemployment levels by critically planning the allocation of labor according to the production levels and labor skill levels,