An economical system is the result of individuals (consumers and producers), groups (firms, trade unions, political parties, families etc) and the organisation coming together and interacting in a legal and sociable society. The function of an economic system is to resolve the basic economic problem - scarcity which means that the resources are limited except wants are infinite. This distri plainlyion has 3 dimensions:
* What is to be produced
* How is it to be produced
* For whom is it to be produced.
There are 2 economic systems which are commonly use world-wide. There are: the fall by the wayside commercialize system in which the role for the political science is limited and the planned system where the government takes viturally total control. In both of these systmes there are distinct methods of resource allocation used. There are economies that use a pleatture of these systems in particular the planned and free market system also known as the mixed parsimony in which some of the decisions resource allocation are through by the government and other by the public.
In a free market economy:
*The factors of production are owned by private individuals or groups of individuals who own the resources. They then rent them fall out to the firms so that they can produce the goods and services.
*E realone is motivated by keen self interest. Consumers maximize welfare, firms maximise profits and privated individuals aim to maximise rents, wages interest and profit.
*Firms can sell anything they want. They respond to the consumers who are allowed to by anything that is sold by the producers.
*The level of competition is very high.
Firms are competing desperately for customers and the consumers are competing with each other for the goods on offer
How are resources allocated under a market mechanism?
What is to be produced?...
Good attempt to explain a fairly complicated concept. The endorse to last paragraph is confusing because it talks about three distinct types of economic systems, and developing countries using a mix of the three. In previous paragraphs there were two distinct types, but stated that all economies were a mix of these two. It is unclear how we got to three. The legion(predicate) typos and mixed tense are distracting. The conclusion should also be stronger.
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