Overview of Key Economic Questions and Systems Within Australia

Topics: Planned economy, Economic system, Economics Pages: 2 (506 words) Published: March 13, 2008
The types of economic systems used all over the world differ from country to country. In this day in age Australia needs good management in production, distribution and consumption; a good economic system. Everyone has wants and needs but as scarcity is the fundamental economic problem facing all societies the wants and needs of everyone is limited. The factors of production and resources are land, labor, capital and entrepreneurship. How efficiently these are used determines the measure of success a nation has, these are the elements the nation has at its disposal to deal with the issue of scarcity. So to use our resources the nation must ask themselves three questions so that they can efficiently allocate their resources. These questions are: what to produce, how to produce and for whom to produce.

The three economic questions will be viewed upon differently in the range of economic systems. A subsistence economy is an economy in which a group generally obtains the necessities of life, but do not attempt to accumulate wealth. This economy generally creates minimal surpluses, which indicates that this system is followed by environmentalist or there is a strong degree of poverty in the nation due to underdevelopment. The three economic questions are still asked but in a more held back manner compared to a market economy. Most of the world's economies are market economies. A market is a system of exchange between buyers and sellers, the sellers and buyers make their own spending and production decisions. Therefore prices change as sellers respond to the changing market conditions. In this type of economic system the governments play an economic management role rather than making ‘what, ‘how' and ‘for whom' decisions. This is almost an opposite to a planned economy in which the state or government manages the economy. The state or government makes all the decisions about the use and distribution of income using the three economic questions.

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