Capitalism Socialism Mixecd Economy Pp t

7/25/2019 Capitalism Socialism Mixecd Economy Pp t

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Economic SystemEconomics - Economicsis the social science that

analyzes the production, distributionand consumption of goods & services.

Economic Systemis the system of production,

distribution and consumption

The economic system is composed of people,institutions and their relationships. It addresses the

problems of economics like the allocation of theresources.


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n economic systemis the combination of the various agencies, entitithat provide the economic structure that guides the social community.


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Economic System! n organized "ay in "hich astate or nation allocates itsresources and distributes goods and services in thenational community.


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Types!

#apitalism $%arket Economy

'ocialism $(lanned economy

%i)ed $#apitalism * 'ocialism


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Capitalismis an economic system in "hich themeans of production are privately o"ned andoperated for pro+t, usually in competitivemarkets.

In other "ords n economic system in "hichinvestment in and o"nership of the means ofproduction, distribution, and e)change of "ealth ismade and maintained chiey by privateindividuals or corporations.


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% '%IT/ called 0theobvious and simple system ofnatural liberty1 $2ook! Wealthof Nations.

'ub3ect to certain restrictions,

individuals $alone or "ith others arefree to decide "here to invest, "hatto produce or sell, and "hat pricesto charge. There is no natural limit tothe range of their e4orts in terms ofassets, sales, and pro+ts or thenumber of customers, employees,and investors or "hether theyoperate in local, regional, national,or international markets.


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%ercantile'ystem

(roduction 5actorsin 6overnment

hands

E)port emphasis

#apitalist 'ystem$dam 'mith

#entralized to ecentralized

system

uthoritarianism torepresentative democracy

5ree o" of resources

(eople strive for self interest infree market

2ene+cial for society

2ased on emand & 'upply5orces

%onopoly to #ompetitiveness

'elf su7ciency to Internationalinterdependence

(roducer interest to customerpo"er


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2ene+ts of #apitalism In years 8999:8;


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%a3or limitations@ #riticism!o"nfall of "ork ethics

5ree %arket * 'elf Interest

ccumulation of "ealth

Encourages ineAuality in asociety

2usiness lobbying "ithgovernment

%onopolistic tendency

/uman resource e)ploitation

Besults in great disparitiesbet"een income of peopleo"ning the capital resourcesand others


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socialism

Collective ownership and democratic control of thematerial means of production by the workers and the

people

Socialismis a term applied to an economic system in "hich

property is held in common and not individually, andrelationships are governed by a political hierarchy. #ommono"nership doesnCt mean decisions are made collectively,ho"ever. Instead, individuals in positions of authority makedecisions in the name of the collective group.

primary goal of socialism is social equality anda distribution of Wealth based on oneDs contribution tosociety and an economic arrangement that "ould serve theinterests of society as a "hole.


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'ocialism as "e kno" it today, most commonly refers to"market socialism," "hich involves individual markete)changes organized by collective planning.

i4erence bet"een socialism and communism is thatcommunists directly oppose the concept of capitalism, aneconomic system in "hich production is controlled by privateinterests. 'ocialists, on the other hand, believe socialism can

e)ist "ithin a capitalist society.


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5eatures of 'ocialism 'ocial "nership of means of production

E)istance of public sector ecisive role of Economic (lanning

(roduction guided by 'ocial 2ene+ts

bolition of e)ploitation of labour


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2ene+ts of 'ocialism

i. 2etter salaries

ii. 'table Environmentiii. Eliminates poverty

iv. 2etter (roducts

v. 5ul+lls survival need

vi. pportunity for citizens to e)plore non-economically-productive pursuits


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#riticism of 'ocialismistorted price signals

'uppression of economic democracy

'lo" Technological advancements

%inimize self management

Beduced incentives


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#%(BI'?


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#%(BI'?..

BS!S # C'!()!S( EC&*+ SC!)!S( EC&*+


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BS!S #$!##E%E&CE

C'!()!S( EC&*+ SC!)!S( EC&*+

Besources"nership

(rivately o"ned 'tate o"ned

5oundation belief competition brings out thebest in people

cooperation is the best"ay for people tocoe)ist

Earning of "ealth everyone "orks for his o"n"ealth

everyone "orks for"ealth "hich isdistributed eAually to

everyone%arket 'cenario Fevel playing +eld (rotection to ('Gs,

(rivate enterprises arepermitted in fe"businesses only

6ovt. interference nly in situations "here la"shave been broken

5ully involved

Employeesmotivation

/ighly motivated on accountof proportional bene+ts

Barely motivated asperformance is notre"arded

%erit (erception of bettereconomic gro"th because of EAual distribution ofincome results in


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*ied Economyny economy in "hich private corporate

enterprises and public sector enterprises e)istside-by-side, and decisions taken through market

mechanism are supplemented by some form ofpartial planning, is to be described as a mi)edeconomy.

This system overcomes the disadvantages of

both the market and planned economic systems.


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(rovides a clear demarcation of the boundaries ofpublic sector and private sector so that the core

sector and strategic sectors are invariably in thepublic sector.

The government intervenes to prevent undue

concentration of economic po"er, andmonopolistic and restrictive trade practices

The rights of the individual are respected and

protected sub3ect only to the reAuirements ofpublic la" and order and morality


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#eatures Besources are o"ned both by the government as

"ell as private individuals. i.e. co-e)istence of bothpublic sector and private sector.

%arket forces prevail but are closely monitored bythe government.

*onopoliesmay be e)isting but under closesupervisionof the government.


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dvanta-es

'roducers and consumer have soverei-ntyto

choose "hat to produce and "hat to consume butproduction and consumption of harmful goods andservices may be stopped by the government.

s compared to %arket economy, a mi)edeconomymay have less income inequalitydue tothe role played by the government.

mi)ed economy represents an achievable balancebet"een individual initiative and social goals.


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Capitalism Socialism Mixecd Economy Pp t