What Is Economic System

Topics: Monetary policy, Inflation, Economics Pages: 23 (4351 words) Published: May 5, 2015
Table of Content

Table of Content1
a)Explanation on economics system attempt to allocate resources effectively.2 b)Assessment on the impact of fiscal and monetary policy on business organisation and their activities.9 c)Explain Malaysian competition policy and other regulation that may impact company.15 TASK 217

a)Explanation on how market structures determine pricing and output decision of business.17 b)Illustration on the way in which market forces shape organisational responses.20 c)Judgement on how business and cultural environments shape the behaviour of your organisation.21 Conclusion22


a) Explanation on economics system attempt to allocate resources effectively. What is economic system?
Economic system is about how a nation allocates the resources to produce a goods and services. It is about what is to produce? How to produce? And for whom to produce? What is to be produced? The economy cannot produce anything without a decision. The decision is important because a nation can decide what goods and what services can be produce to use by people. For example, the minister of Ministry of Youth and Sport, Datuk Khairi Jamaluddin decide to build a sport centre in Negeri Sembilan. It will give a good impact to the community in Negeri Sembilan.

How to produce? There is a limited number in factor of production. So, the decision that has to be made must be clear and relevant with the factor of the production in order to produce the output. For example, there is a lot of products that want to produce, should the government use the employees in different sector? For whom to produce? After produce the product, so who is the consumer? So the decision is so important in order to distribute the goods and services to right people and equally.

Types of economic system

Command economics is also known as planned economy. This type of economy is totally controlled by the government. The government decide what to produce, how the good and services are made, and who get the goods and the services. The government decides how to use and distribute resources. The government regulates prices and wage. It may even determine what sorts of work individuals do. Socialism is a type of command economic system. Historically, the government has assumed varying degrees of control over the economy in socialist countries. In some, only major industries have been subjected to government management; in others, the government has exercised far more extensive control over the economy. The examples of the country that using this economic system is China, Cuba, North Korea and the former Soviet Union are examples of countries that have command economies. (Investopedia)

There are several characteristics of the command system. First is a command economy is more stable, guaranteeing constant exploitation of the existing resources in the country. It is least affected by financial downturns and inflations. This is good for a country development because the economy is stable and it can attract more investor but the command economy system is not too easily let the foreign investor to enter their market. This happen because the economy is controlled tightly by the government. Second is the command economy system country has both surplus production and unemployment rates at the reasonable level. And the last one is the government sets the prices of goods and services.

Free market

Free market is more on individual or private firm decision. The resources also allocated from market forces of supply and demand. In the free market, competition is good for the market because it encourages innovation and it can give good benefits to the consumer. Government is not interfering with decision that make by the firm or individual. The role of the government of a nation is only limited to controlling the law and order of a country and to ensure that a 'fair price' is charged by the...
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