An economic system is the ways which a country allocates its resources. It is ways in which production is done, how to allocate resources that have been produced. An economic system is aimed at solving the four economic system which are command, market, traditional and mixed system. Countries this days usually use the mixed economic system and market system. Each of the system will be discussed and analysed.
• Command economic system
In this economic system all the resources are controlled and managed by the government and in that the government produce goods and services for everybody in a country. All the decisions in an economic system are taken by the government on what to produce, where and how to produce. Sometimes this economic system does not work for people because since the government has a control to every resource, they can dictate the people.
Advantages: is that the unemployment is very low most of the people I he country are employed. The prices of goods and services are low so that everyone can afford the goods and services and also the inflation rate is low.
Disadvantages: people/firms cannot choose what they want to produce, the government tells what, how to produce. The lack of profit motive leads the businesses to perform poorly and not produce good quality prices.
• Market system
The supply and demand of products determine the price at which goods and service will be sold. Decisions concerning pricing of goods and services in this economic system is taken by the individuals. There is no government intervention as in like command system, the government can only intervene to an extent at which they need to stabilize the prices if they are too high. According to Adam Smith (1776:25) as cited in (Samuelson 2010:25) “Every individual endeavours to employ his capital so that its produce may be of greatest value. He intends only his own security, only his own gain”. In there this economic system there is no firm or government that can solve the economic problems.
Advantages: there is a variety of goods and services that are available as there is a lot of firms that are in providing them to the consumers and firm will produce an efficient goods and services, so that consumers can purchase their products. Firms can quickly meet people’s demands for a certain product.
Disadvantages: the unemployment rate will be high because firms will only hire people that have certain skills to perform certain tasks to increase profitability for the firms.
• Traditional economic system
In this economic system the beliefs and customs control the operations of that country. Things do not change much, so in this economic system you know what you are expected to do, who you will exchange resources and you know what things you are not supposed to do. The individuals have to combine their efforts and share everything such as income and products equally. According (Dostoc, 2013) it is being said that most people from this economic system...