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Explain the characteristics of Economic system

      

Explain the characteristics of Economic system

  

Answers

Felix
(a) Role of Government
In every economic system consumers and producers are the ones that make decisions that shape the economy. Government activities are however very important to keep the economy working. The government guides the overall pace of economic activity, maintain steady growth, and reduce unemployment and inflationary rates. This the government does by applying suitable microeconomics policy one of which could take the form of adjusting spending and tax (Fiscal policy) or managing the money supply and controlling the use of credit (monetary policy), it can slow down or speed up an economy’s rate of growth.
(b) Freedom of Choice
In microeconomics, freedom of choice is often employed to describe the freedom of economic agents (consumers, producers and government) to allocate their resources as they see it fit. This includes the freedom to buy any goods or services and freedom to engage employment available to them. However, economic freedom to choose largely depends upon market competition. Since buyers’ available options are usually the result of various factors controlled by sellers, such as overall quality of a product or a service and advertisement. In the event that a monopoly exists, the consumer no longer has the freedom to choose to buy from a different producer.

(c) Ownership of Resources and factors of Production
Firms often own land and capital but not the labour working on it. The ownership of factors of production (land, labour and capital) by a firm depends to a great extent on which factors, as well as the type of economy in which a firm operates. In a market-based economy, such as that of the United States of America, firms may own land and capital but do not own labour. Greg Markin of Harvard University, dense factors of production as the inputs used to produce goods and services. These inputs (factors) comprise land, labour and capital. Land consists of all-natural gifts of nature. Capital consists of the buildings that occupy land and the machines and equipment used in production. Under a socialist economy, the government, rather than firms, owns land and capital. Labour works for the government or for government controlled firms. In a mixed economy, both the government and private firms own land and capital.
In all the systems, land and capital may be owned but labour is not owned but hired.

(d) Price Determination
It has been said by economists that price is the nexus between demand and supply. Economists also agree that price is actually set or fixed by market forces, balancing supply and demand in order to optimize output and reducing waste. Economists explain that price determination is a rational process which is very easy to calculate.

(e) Profit Gainers
Another very important feature of an economic system is profit gainers. Profit gainers include investors and entrepreneurs. They put their resources into production in order to make profit. They seek to make profit through subsidies, protectionism, government contracts or other such favorable arrangements.
Anganifelix answered the question on December 8, 2018 at 11:48

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