An economic organization is a means by which cultures or governments organize and distribute the resources, services, and goods available in a geographic region or country.
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Traditional Economic System
The traditional economic scheme is based on goods, services, and labor, all of which follow certain established trends. Much depends on people and there is very little division of labor or specialization. In essence, traditional economics is very simple and the oldest are four types.
Approximately parts of the world still drive with a old-style economic system. It is commonly found in rural areas in second and third world countries where economic activity predominantly consists of agriculture or other traditional income-generating activities.
In communities with traditional economies, there are usually very few resources to share. Either there are few natural resources in the region or access to them is restricted in some way. Thus, unlike the other three, the traditional system lacks the potential to generate surpluses. However, the traditional economic system is highly sustainable precisely because of its primitive nature. Also, due to the low throughput compared to the other three systems, there is very little waste.
2. Dominate The Economic System
In a knowledge system, there is a dominant central authority, usually the government, that controls a significant part of the economic structure. Also known as the planned system, the communist economic system is common in communist societies as production decisions are reserved for the government.
When an economy has access to many resources, it is likely to tend towards a command economy structure. In such a case, the government steps in and exercises control over the resources. Ideally, central control covers valuable resources like gold or oil. People regulate other less important industries like farming.
In theory, the command system works actual well as long as the central expert exercises control in the best interest of the general population. However, this rarely appears to be the case. Command economies are rigid compared to other systems. They are slow to respond to change because power is centralized. This makes them vulnerable to economic crises or emergencies, as they cannot quickly adapt to changing conditions.
3. Market Economy System
Market systems are based on the concept of free marketplaces. In other words, there is very little administration intervention. The government movements little control over resources and does not intervene in important parts of the economy. Instead, regulation comes from people and from the relationship between supply and demand.
The market economy system is mainly theoretical. That is, in reality there is no such thing as a pure market system. Why? Well, all economies are subject to some form of interference from a central authority. For example, most governments enact laws that control fair trade and monopolies.
From a theoretical point of view, a marketplace economy allows for significant growth. Growth is probably the highest in a market economy system.
The main disadvantage of a market economy is that it allows private companies to accumulate a great deal of economic power, especially those that possess highly valuable resources. The distribution of resources is not fair because those who are economically successful control most of them.
4. Mixed System
Mixed systems combine the characteristics of market and command economies. For this reason, mixed systems are also called dual systems. Occasionally the term is used to label a market system under strict controlling control.
Many countries in the industrialized Western Hemisphere follow a mixed system. Most of the industries are private, while the rest, consisting mainly of public services, are under government control.
Mixing systems are the norm throughout the world. A mixed system is said to combine the best qualities of the market and leadership systems. In practical terms, however, mixed economies face the challenge of finding the right balance between free markets and government control. Governments tend to exercise much more control than is necessary.
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