In this assignment I will be describing the economic system which operate throughout the world also including the methods which are used to control. I will also discuss the relevance of RPI and CPI and how they are measured.
The world’s economic systems consists of four main categories: traditional economy, market economy, command economy and mixed economy economic system it is important that each system define what to produce how its produce it and for whom to produced it. This is all based on the products which is produced as well as environment, however certain economic strategies may perform better than others.
Traditional economy is a system which allows traditions custom systems also belief which has an influence on its operation. Tradition economy is normally found in rural regions which consist of strong levels of subsistence farming never the less Countries which are able to increase their economies past the traditional level often develop to a command economies or even a market economies. Individuals that normally depend on traditional economic systems tend mostly forward activities toward meeting their own and their families' basic needs, rather than generating a surplus and trading it for unnecessary consumer products. A downfall on traditional economy is the fact that people may want to switch economies. Individuals will normally uses a certain methods regarding production which has been used for a long period of time in terms of developing the society because the production is low this has an impact, this can also have an influence on the country. The downfall of individuals having a given reasonability is that the roles may not be suitable for the members as well as not wanting the roles which will lower productivity. A positive outcome of traditional economy is that the member are very supportive as a result of people using the limited resources in a useful way. No one steals the job of the other in a traditional economy. There is a lot of support from people, and everyone tries to use the limited resources effectively. In a traditional economy, people live in less fear. Hence, there are very less chances of crime. There are less chances of a gap between the rich and the poor. The racing to accumulate wealth and preserve jobs that is characteristic to a modern economy is not a part of traditional economies. People lead a calmer life and are much more secure. There is a leader for every group whose say is final in all socio-economic decisions.
Scarcity is considered to be an economic problem due to the fact human want unlimited resources however there are only limited resources available. Scarcity is common economic problems which the world faces. Scarcity occurs due to the fact there is a lot of demand for resources which are limited. This then makes a trade-offs. We have to efficiently allocate resources. We have to do those things because resources are limited and cannot meet our own unlimited demands.
Free market means that buyers and sellers can make the deals they wish to make without any interference, except by the forces of demand and supply.http://www.businessdictionary.com/definition/free-market.html#ixzz3rCUg0sBE this allows the sellers to set a price on the product which they choose to sell. The positive outcome of having a free market system is that it means that individuals are able to bring new services also products in order to sell to generate a profit. In free market customers make vital decision in regards if products and services will be successful due to customer preference. However a setback on free market system is that a lot of workers can be exploited due to the working conditions as well as working incredible long working hours for a less pay, because health and safety cost money big firms tend to move their production which there are a few safety regulations. A free market system takes place when certain items are made for consumption by the mass population of people. if there is a high demand for an specific item then it will result in the items being produced more , never the less If an supply is unable to meet the demand, then the prices of the item will increase , which means lesser people will purchase the items due to prices. This can turn to an unwanted of goods which can affect business profit.
Command economic system is a system which goods and services are controlled by the government counties such as North Korea and Cuba would be considered to be a command economy because the government has control over production and the goods and services and how it is produces. The command economic system targets on fulfilling the fundamental needs of the citizens in the country as well as the equal needs, A command economy focuses on providing for all the basic needs of its citizens and promoting equality, or the values it holds important. It aims to provide food, housing, education, health care and other services for the citizenry, as well as careers for everyone (though the choices are restricted). In theory, a major advantage of a command economy is the eradication or avoidance of extreme poverty and inequality. Command economies mainly focuses on future plains for society which indicates that the citizens needs and wants are not always met, for instances the command economy system can have a limitation in regards of the customers’ needs such as only producing one or two types of car brands, this would indicate that the customers would have less of an options when trying to buy a car due to the fact the preferences are neglected. If the government doesn’t approve of impractical or satisfactory products they can be unavailable.
.Read more: http://www.ehow.com/info_8477369_advantages-disadvantages-command-economies.html
Mixed command refers to two sectors public and private which combined in solving economic problems as well as enterprises afflation with production and supply of goods and services. Market economy, including ownership of private property, limitations on government interference, and promoting innovation http://useconomy.about.com/od/US-Economy-Theory/tp/Mixed-Economy.htmIn terms of mixed economy the government has a few ownership for certain fields which means certain areas are not command economy controls in relations to resources. However counties such as Sweden which the government have curriculums for example education, health care, and transportation. Private sector’s in Sweden includes industries never the less it may not be the situation with a mixed economy, mixed economies also include many command economy in specific areas which relate to the market this can involve the military, transportation, and trades international. A lot of mixed economies have authority of important industries, for instance banking and energy production certain mixed economies push the government to mainly focus on retirement schemes, welfare, and health care. A set back with an mixed economy is that due to the fact of the government participating in the economy this means that firm owners are unable to acknowledge where there taxes goes, which means that the government is able to collect a certain amount of percentage from firm owners revenue which means that the money could possibly be spent on education programs or retirement programmes.
http://www.bls.gov/dolfaq/bls_ques1.htm
CPI stands for customer price index, CPI is an economic indicator that measures the changes of cost of a fixed market basket relating to products and services for example transportation, education, housing, and food. When CPI increases, wages have to increase eventually, CPI is normally used to adjust wages and income, retirement benefits, tax brackets, and many vital economic indicators. Never the less, due to the fact the government are not as fast the markets, if GDP grows too rapidly, the government will not be able to keep up in order for an necessary income adjustments relating to people trying to maintain an substantial quality of life due to the fact the cost of living rising too quickly.