economy systems

Economic systems

A.                 Free market economy / capitalist / laissez  faire

Definitions

-          Is an economy system was operation without government intervention.

Features:

-          Decisions are taken by individual and firm with no government intervention.

-          It usually associated with a pure capitalist, where land and capital are privately owned.

-          The price mechanism used in this system whereby changes in price in response to change in demand and supply have the effect of making demand equal to supply.

Advantaged:

-          Individual are free to make their own economic choice

-          Freedom to workers and firm to choose where to work and what production methods to use.

Disadvantages:

-          Existence of wide gap between the rich and the poor.

-          Existence of unemployment problem.

 

B.                  Centrally planned or command economy / socialist economy

Definitions

-          Is economy was fully controller by government.

Features:

-          Decision are taken by the government or central authorities

-           It usually associated with a socialist or communist economy system, where land and capital are collectively owned. The government or central authorities plans the allocation of resources.

Advantages:

-          Decisions of allocation of resources always are in the interests of society as a whole and with specific national goals.

-          Unemployment could be largely avoided if the government carefully planned the allocation of labour.

-          Same income distribution

-          Produces the goods and services at efficiency level.

Disadvantages:

-          Mistake decide in economy (decision made by some people only)

-          Technology and innovation are undeveloped because all productions are decided by government.

C.                  Mixed economy

Definitions

-          Is a economy system that incorporates a mixture of private and government ownership or control ( capitalism and socialist)

Features:

-          This system use market mechanism and allow government intervention in economy activities.

-          Price level determine by price’s mechanism but basic economy’s problem resolved together between government and private.

-          Individual and firm free to have properties.

Advantages:

-          The government will try to reduce gap of income between rich and poor people. ( taxes and subsidies)

-          Government will also control the existence of monopolies.

Disadvantages:

-            Business freedom is not totally offered for enterprise.

D.                 Islamic economy

Definitions:

-          Economy which uses Allah's creation natural resources with most efficient and fair way based on Islamic laws.

Features:

-          Al Quran and Hadith was the main source in Islamic economics’ activities.

-          Individual free to own property

-          individual no give priority to profit in business

-          fair competition permitted

-          free to decide in economics

Advantages:

-          Good in the world and afterworld

-          Free competition