What is Economics? :: Economic Systems Economy Scarcity Essays

Economics, in one aspect, is the study of how individuals, societies,and countries manage to serve up with the problem of scarcity. Scarcityis a problem within frugals because the wants of nation beunlimited and the resources available to fulfil those wants are finite(Sloman, 2001). The outcome to scarcity is efficiency which Gowlandand Paterson (1993) described as the most benefit from a certainamount of scarce resources. Within the economic system, there areseveral types of economies, each generating a different level ofefficiency. It is said that an economic system that has allocativeefficiency, productive efficiency, and equity will be effective. Along with the latter(prenominal) mentioned, the division of labour andcomparative advantage, when exploited also bring close to theeffectiveness of a system.Within an economic system there are two contrasting ideals the marketeconomy and the planned economy. A trim-market or laissez-faireeconomy makes decisions on an individual level with minimal organizationintervention. On the other hand of the spectrum lies the plannedeconomy where all economic decisions are made by the government(Sloman, 2001). Both economies have their advantages anddisadvantages. In a free-market economy there is freedom of choice,high incentives, and the belief in consumer sovereignty, yet, thereare problems such as inequality of income, macroeconomic instability,and the put on the line of market failure. Likewise, though a planned economyhas advantages such as low levels of unemployment and equaldistri andion of income, there is a loss of ad hominem freedom and lackof consumer choice. Many people feel that efficiency lies in thefree-market economy where one can easily answer the questions whatshould be produced, how it should be produced, and for whom. However,the problem with this capitalist economy is that poverty and boomand bust cycles concentrate progress (Economic Systems How Societies adaptto Problems, 2003). If you car e about economic efficiency, youshould like free marketsBut they would also believe the second oneshould be qualified, in addition to its stabilisation and distributionfunctions, governments will be needed to manufacture marketimperfections (Rhoads, 1999, p.66) Rhoads (1999) mentions how amarket economy leans towards more efficiency but needs the governmentsporadically, a combination which makes the so-called mixed economy. A mixed economy which leans towards laissez-faire, as in the case withthe U.S or the unite Kingdom, is rather successful. On the contrary,countries, such as Burma or North Korea, which incline towards a plannedeconomy, lack progress.Along with allocative efficiency, how resources should be allocated,productive efficiency, which performance method should be utilised, andequity, specialisation and exchange are both demand to have anefficient economy (Demmert, 1991 p.3). Specialisation comes in the