Economic Systems

Economic Systems

1. Capitalism is an economic system in which all or most of all, factors of production and distribution are privately owned and operated for profits (Nickles, McHugh, & McHugh, 2014). The capitalist economy is based on the free market under this foundation there are four rights: 1) the right to own property 2) the right to own a business 3) the freedom of competition and 4) the right to freedom of choice (Nickles, McHugh, & McHugh, 2014).

   • Pro's of Capitalism
     • Businesses can decide how much they will price their products. The concept is supply and demand( Nickles, McHugh, & McHugh, 2014).
     • Businesses invest in their innovation to research on improving their best interests in securing to make more money and improving their production.
   • Con's of Capitalism
     • The inability to be productive and competitive in a capitalist economy will leave you left behind in society.
     • Companies are encouraged to pay the least amount of pay to employers and sell their product for high dollar amounts. This leads to employers getting lower wages and be forced to accept or be without a job.
   • An example of capitalism is a hairdresser provides a service by An exacutting, coloring, and styling hair. The consumer feels great about themselves and pays for the excellent service and products that applied to them.

2. Socialism is the economic system where the government owns most of the businesses. Profits in this economic system are distributed evenly among the people. The tax rate in a socialist economy is relatively high (Nickles, McHugh, & McHugh, 2014).

   • Pro's of Socialism
     • Socialism significant benefit is supposed to be equality. The government takes taxes from the wealthy and redistributes to the less fortunate.
     • Workers in socialism economy get more extended vacations and shorter work hours per week. Free education, health care, childcare for those who work (Nickles, McHugh, & McHugh, 2014).
   • Con's of Socialism
     • The consequence of socialism is that there are no incentives for business people, which lack motivation for innovation (Nickles, McHugh, & McHugh, 2014).
     • The high taxation on wealthy lead to individuals with intelligence seeking other countries to live cause brain drain for the socialism economy (Nickles, McHugh, & McHugh, 2014).
   • An example of socialism is a student who studied hard to make an excellent grade in school, then to have points taken away to give to another student who scored very low inorder to be equal (Nickles, McHugh, & McHugh, 2014).

3. Communism is the economic system in which the government makes almost all significant factors and decisions for production, and has intrusive regulations on citizens rights (Nickles, McHugh, & McHugh, 2014).

   • Communism creates a sense of equality that everyone gets the same chance to build a life for themselves. Almost everyone is employed and educated within some limitations might apply.
     • Pro of Communism
   • Cons of Communism
     • Government has no way of knowing what to produce because supply and demand do not reflect in the prices as it would in the free market.
     • The government decides jobs and living arrangements for the people, so the lack of working hard and incentives are deficient (Nickles, McHugh, & McHugh, 2014).
   • An example of communism in North Korea, many are without food and other vital resources because the government association is aggressive with citizens lives (Nickles, McHugh, & McHugh, 2014).

4. Economic Systems are essential because they assist the country in establishing control of production and distributes resources of goods and services. Factors of which include: labor, capital, information resources, entrepreneurs and physical resources. Implementing a structure with guidelines creates managment for their countries economics (Nickles, McHugh, & McHugh, 2014).

5. The United States operates as a capitalist economy mixed with socialism. The United States embraces the freedoms but also includes financial policies such as monetary and fiscal policies. Businesses have the freedom to retain profits and have the ability to pay employees wages and salaries as they see fit (Nickles, McHugh, & McHugh, 2014).