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IQRA UNIVERSITY

NAME: BHAVNA AMARLAL ADVANI PROGRAM: MBA (MORNING) REG#: 13456 DAY & TIMINGS: 12:00-3:00 ASSIGNMENT#: 7

INSTRUCTOR: MAAM ALAM RAZA COURSE: BUSINESS ECONOMICS

DATE ASSIGNED: 2-MAY-2011 SUBMITTED ON: 9-MAY-2011

INTRODUCTION
Scarcity is the fundamental challenge confronting all individuals and nations. We all face limitations, so we all have to make choices. We can't always get what we want. How we deal with these limitationsthat is, how we prioritize and allocate our limited income, time, and resources is the basic economic challenge that has confronted individuals and nations throughout history. But not every nation has addressed this challenge in the same way. Societies have developed different broad economic approaches to manage their resources The way that each individual lives in a society is based on how the country handles problems and questions involving their economy. These are issues dealing with inflation, consumer needs, and so forth. When it comes to an economy, there are three basic economic questions that each must be answered.

WHAT TO MAKE?

HOW TO MAKE IT?

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WHO GETS IT?

WHAT IS THE MEANING OF THE TERM ECONOMIC SYSTEM?

The way that a country handles these questions is based on their economic system. An economic system is basically the decision that is done to answer these questions. There are three main types of economic systems present in the world:  Market Economy  Command Economy  Mixed Economy

MARKET ECONOMY
Individual or Consumer based Economic System that relies on the consumption choices of consumers. In market economies, economic decisions are made by individuals. The unfettered interaction of individuals and companies in the marketplace determines how resources are allocated and goods are distributed. Individuals choose how to invest their personal resourceswhat training to pursue, what jobs to take, what goods or services to produce. And individuals decide what to consume. Within a pure market economy the government is entirely absent from economic affairs. Examples
 The U.S.A.  Japan  Any Capitalist Economy

COMMAND ECONOMY
Centrally Controlled Economy where the Government makes all decisions. In a command economic system or planned economy, the government controls the economy. The state decides how to use and distribute resources. The government regulates prices and wages; 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 classic (failed) example of a command economy was the communist Soviet Union. The collapse of the communist bloc in the late 1980s led to the demise of many command economies around the world; Cuba continues to hold on to its planned economy even today. Examples  Cuba  China  Any Communist Country or Dictatorship

MIXED ECONOMY
This system incorporates governmental involvement into a Market Based Economy. A mixed economic system combines elements of the market and command economy. Many economic decisions are made in the market by individuals. But the government also plays a role in the allocation and distribution of resources. The United States today, like most advanced nations, is a mixed economy. The eternal question for mixed economies is just what the right mix between the public and private sectors of the economy should be. Examples  The U.S.A.  Japan  Most Modern Economies

CONCLUSION
In reality there are no pure market economies, nor are there any pure command economies. For example, even in the United States, where free enterprise reigns, the government plays a major role in the economy. Minimum wages, social security, and regulatory policies are examples of government involvement. In China, for example, some private ownership of businesses is allowed, however the government still maintains tight control over the factors of production and prices. While we could say that both the United States and China are mixed economies because they contain both market and command economic features, to do so would be misleading because the role that the respective governments play in the economy are quite different