Presentation On Economic

Systems

Presented By
Tausif Ahmed
Zeeshan Ahmed
Syed Ahmar Hejazi
Wamiq Khan
Talha Karim
 ECONOMIC SYSTEM

An economy is a system of production,

distribution, and consumption of economic goods.
Economic goods are any material items or
services that satisfy people's needs and wants

An economic system is the structure of production,

allocation of economic inputs, distribution of
economic outputs,
and consumption of goods and services in an
economy.
 Economic
System
Economic systems
mainly deal with the
relationships between
production (supply) and
consumption (demand).

What is being produced

has to be consumed and
what is being consumed
has to be produced.
 Flow Chart Of Economic System

* Manufacturing. Transformation of
materials into intermediate and
finished goods.
* Regulation. The way the
production system is controlled and
regulated. Mostly the role of
governments.
* Circulation. Activities that link
the elements of the production
system. Includes transport and
communications.
* Distribution. Activities making
goods and services available to the
consumer, such as retailing.
DIMENSIONS OF ECONOMIC SYSTEM

Decision-Making Structure: How decisions are made

regarding the use of economic inputs , distribution of
output, the level of centralization in decision-making, and
who makes these decisions.

Coordination Mechanism: How information is obtained

and used to coordinate economic activity. The two dominant
forms of coordination include planning and the market
.
 Contd.

Productive Property Rights: This refers to ownership and

control over the use of the means of production. They may be
owned privately, by the public, by those who use the property,
or held in common by all of society.

Incentive System: A mechanism for inducing certian

economic agents to engage in productive activity; it can be
based on either material reward (compensation) or moral
reward (social prestige).
Basic types of Economic systems

Capitalist Economy
Socialist Economy
Mixed economy
 Adam Smith
THE WEALTH OF
NATIONS (1776)
bible of Capitalism
Market Economies

Also called
Capitalism
Free Enterprise
Private Enterprise
 Market Economy

A capitalist economy is an economic system in which

production and distribution of commodities takes place
through the mechanism of free markets.
An individual has right to buy and sell any number of goods
and services and to choose any occupation. So, it is also
called as FREE MARKET ECONOMY.
Example- U.K., Germany.
Centrally Directed Economies

AKA
Command Economies
Marxist Economies
Communist
Economies
SOCIALIST ECONOMY
(PLANNED ECONOMY)

A planned economy is also sometimes called a command economy.

The most important aspect of this type of economy is that all major
decisions related to the production, distribution, commodity and
service prices, are all made by the government.

The tool of production are organized, managed and owned by

government, with the benefit accruing to public.

Objective is for government to own and run business for the good of
society
 13

MERITS OF SOCIALIST ECONOMY

Efficient use of resources

Rapid economic growth
Improving productive efficiency
Social security and welfare
Social justice
Economic stability
 14

DEMERITS OF SOCIALIST
ECONOMY

Bureaucracy and Red Tapism

Not successful in business
Insufficient resources
Misallocation of resources
Loss of consumers sovereignty
 Mixed Economy

A mixed economy combines elements of both the planned and

the market economies in one cohesive system. This means that
certain features from both market and planned economic
systems are taken to form this type of economy.

In a mixed economy there is flexibility in some areas and

government control in others. Mixed economies include both
capitalist and socialist economic policies and often arise in
societies that seek to balance a wide range of political and
economic views.
 16

ADVANTAGES OF MIXED ECONOMY

Social safety
Free enterprise
People can make their own decisions
Limited control of government
 17

DISADVANTAGES OF MIXED ECONOMY

Suffers from disadvantages of both capitalist

and socialist economy.
Business people tend to find their own
markets.
 18

FEATURES OF MIXED ECONOMY

Co-existence of public and private sectors

Role of price system and government
directives
Government regulation and control of private
sector
Consumers sovereignty protected
Government protection of labor
 19

ELEMENTS OF MIXED ECONOMY

to possess means of production

to participate in managerial decisions
to buy and sell
to hire
libraries and other information services
roads and other transportation services
schools and other education services
social security for the aged and infirm
government subsidies to business
 OTHERS TYPES OF ECONOMIC SYSTEM

Traditional economy (a generic term for older

economic systems)
Participatory economics (a system where the
production and distribution of goods is guided by
public participation)
Gift economy (where an exchange is made without any
explicit agreement for immediate or future rewards)
Barter economy(where goods and services are directly
exchanged for other goods or services)