CS FOUNDATION BUSINESS ECONOMICS ECONOMIC SYSTEM

    CS FOUNDATION BUSINESS ECONOMICS
THE FUNDAMENTAL OF ECONOMICS 4
ECONOMIC SYSTEM
MEANING OF ECONOMIC SYSTEM

•    AN ECONOMIC SET IS AN ENTIRE SET OF ARRANGEMENT AND INSTITUTIONS FOR MEETING TWO FOLD OBJECTIVES OF SOCIETY

1.       INCREASING THE AVAILABILITY OF RESOURCES

2.       ENSURING THE ECONOMIC USE

•    MEANING OF ECONOMIC SYSTEM

•    SYSTEM OF PRODUCTION,RESOURCE ALLOCATION AND DISTRIBUTION OF GOODS AND SERVICES WITH IN A SOCIETY OR GIVEN GEOGRAPHIC AREA. IT INCLUDES THE COMBINATION OF VARIOUS INSTITUTIONS,AGENCIES,ENTITIES,DECISION MAKING PROCESS AND PATTERN OF CONSUMPTION.

•    ALL ECONOMIC SYSTEM HAVE THREE QUESTIONS TO ASK:HOW TO PRODUCE,IN WHAT QUANTITIES AND WHO RECEIVES THE OUTPUT OF PRODUCTION,

•     TYPES  OF ECONOMIC SYSTEM

•   THREE IMPORTANT TYPES OF ECONOMIC SYSTEM. TYPE OF ECONOMIC SYSTEM ARE  BASED UPON PER CAPITA INCOME,PRIORITIZATION OF INDIVIDUALS TO SPEND THEIR RESOURCES AND SCARCITY OF BOTH AND RESOURCES

1.       CAPITALISM

2.       SOCIALISM

3.       MIXED ECONOMY

• CAPITALISM

•   PHILOSOPHY OF INDIVIDUALISM BELIEVED IN PRIVATE OWNERSHIP OF ALL AGENTS OF PRODUCTION,IN PRIVATE SHARING OF DISTRIBUTION PROCESSES THAT DETERMINE THE FUNCTIONS REWARDS OF EACH PARTICIPANTS AND IN INDIVIDUAL EXPRESSION OF CONSUMER CHOICE THROUGH A FREE MARKET PLACE.

•    DEFINITION

•   LOUCKS,” CAPITALISM IS A SYSTEM OF ECONOMIC ORGANIZATION FEATURED BY THE PRIVATE OWNERSHIP AND USE FOR THE PRIVATE PROFIT OF MAN MADE AND NATURE MADE CAPITAL.

•    FEATURES

1. FREE MARKET AND ABSENCE OF GOVERNMENT INTERVENTION IN THE ECONOMY
2. MEANS OF PRODUCTION ARE OWNED PRIVATELY THAT IS BY INDIVIDUAL AND HOUSEHOLD. THE INSTITUTION OF PRIVATE PROPERTY ALSO COVERS THE RIGHT TO INHERITANCE
3. PEOPLE ACQUIRE MOTIVE FOR EARNING MORE,ALWAYS LOOKING FOR MORE PROFITABLE OPPORTUNITIES AND SYSTEM  HAS HIGH PRODUCTION POTENTIAL
4. FEATURES
5. PRIVATE PROPERTY AND INHERITANCE LEAD TO EVER INCREASING INCOME INEQUALITIES OF INCOME AND WEALTH
6. POLICY OF LAISSEZ FAIRE MEANS ABSENCE OF GOVERNMENT INTERVENTIONS
7. COMPETITIVE STRUCTURE
8. USE OF MONEY AND CREDIT
9. ALL ECONOMIC ACTIVITIES ARE GUIDED BY MARKET FORCES

•    MERITS

1.        ENSURE OPTIMAL UTILIZATION OF RESOURCES

2.       WHAT TO PRODUCE AND HOW TO PRODUCE ON THE MARKET FORCES OF DEMAND AND SUPPLY

3.       AUTOMATIC BALANCE IN THE SYSTEM ( SELF REGULATORY)

4.       EFFICIENCY PROPERLY REWARDED

5.       INCENTIVES FOR RISKS AND UNCERTAINTIES

6.       ECONOMIC GROWTH IS FASTER

7.       ENCOURAGE CAPITAL FORMATION AND PROVIDE FLEXIBILITY

•    DEMERITS OF CAPITALISM

1.       WASTAGE AND MISALLOCATION OF RESOURCES

2.       GENERATION OF INEQUALITIES OF INCOME AND  WEALTH 

3.       NO PRODUCTION OF MERIT GOODS RATHER PRODUCING THOSE GOODS WHICH ARE MORE PROFITABLE

4.       CONSUMER’S SOVEREIGNTY IS A MYTH

5.       INEQUALITY OF WEALTH

6.       NO FREEDOM

7.       CLASS STRUGGLE

8.       UNEMPLOYMENT AND CORRUPTION

9.       LOSS OF HUMAN VALUES AND WELFARE

•    SOCIALISM

•   IS AN ECONOMIC SYSTEM WHERE THE MEANS OF PRODUCTION ARE EITHER OWNED OR MANAGED BY THE STATE AND WHERE THE INVESTMENT STRUCTURE,CONSUMPTION,ALLOCATION OF RESOURCES,DISTRIBUTION OF INCOME ETC ARE REGULATED AND DIRECTED BY STATE.

•   FOUNDATIONS WERE LAID BY KARL MARX AND FEERIC ENGLES

•    DEFINITION

•    H.D. DICKINSON,” SOCIALISM IS AN  ORGANIZATION OF THE SOCIETY IN WHICH THE MATERIAL MEANS OF PRODUCTION ARE OWNED BY THE WHOLE COMMODITY AND OPERATED BY ORGANS,REPRESENTATIVE OF AND RESPONSIBLE TO,ALL MEMBERS OF COMMUNITY ACCORDING TO A GENERAL PLAN,ALL MEMBERS OF THE COMMUNITY BEING ENTITLED TO GET BENEFITS FROM THE RESULTS OF SUCH SOCIALIST PLANNED PRODUCTION ON THE BASIS OF EQUAL RIGHTS.

•  ACCORDING TO MAURICE DOBB,”THE FUNDAMENTAL CHARACTER OF SOCIALISM CONSISTS IN ITS ABOLITION OF CLASS RELATIONS WHICH FORM THE BASIS OF CAPITALIST PRODUCTION THROUGH  EXPROPRIATION OF THE PROPERTIED CLASS AND SOCIALISATION OF LAND AND CAPITAL

•    FEATURES OF SOCIALISM

1.       NOT GUIDED BY FREE WORKING OF MARKET MECHANISM. HANDLED BY CENTRALIZED ECONOMIC PLANNING.REGULATION OF PRICES WITH THE OBJECTIVES OF SERVING THE NATIONAL INTERESTS

2.       MEANS OF PRODUCTION ARE OWNED BY GOVERNMENT AUTHORITIES . THE INSTITUTIONS OF PRIVATE PROPERTY AND INHERITANCE ARE ABOLISHED

3.       RECOGNIZES THE ILL EFFECTS OF MONEY AND CREDIT,TRY TO RESTRICT IT TO MINIMUM NECESSARY

4.       DECISION WHAT TO PRODUCE AND HOW TO PRODUCE TAKEN BY CENTRAL PLANNING AUTHORITY

5.       CLASS LESS SOCIETY

•    MERITS

1. BETTER ALLOCATION AND UTILIZATION OF RESOURCES
2. ELIMINATION OF EMPLOYMENT
3. NO CYCLIC FLUCTUATIONS
4. NO CLASS STRUGGLE
5. REDUCTION IN EQUALITY OF INCOME

•    DEMERITS

1. BUREAUCRATIZATION
2. LACK OF INCENTIVES
3. RED TAPISM
4. NO CONSUMER SOVEREIGNTY
5. CONCENTRATION OF ECONOMIC POWER IN THE HANDS OF STATE
6. PROMOTES CORRUPTION
7. MISALLOCATION OF RESOURCES

•    MIXED ECONOMY

1.       SOME ELEMENTS OF BOTH  CAPITALISM AND SOCIALISM

2.       INDIAN ECONOMY IS MIXED ECONOMY

3.       EXISTENCE OF PUBLIC SECTOR.PRIVATE SECTOR AND JOINT SECTOR

4.       ACCORDING TO DIRECTIVE PRINCIPLES OF STATE POLICY WE HAVE ADOPTED MIXED ECONOMY

•    CHARACTERISTICS

1.       EXISTENCE OF PUBLIC AND PRIVATE SECTOR

2.       THEIR FIELD ARE DEFINED

3.       CONSTANT VIGILANCE

4.       SELECTION OF DETAILED FEATURES OF MIXED ECON