What is Economics? :: Economic Systems Economy Scarcity Essays

Economics, in one aspect, is the study of how individuals, societies,and countries manage to deal with the problem of scarcity. Scarcityis a problem within frugals because the wants of people arunlimited and the resources available to fulfil those wants are finite(Sloman, 2001). The answer to scarcity is efficiency which Gowlandand Paterson (1993) described as the most benefit from a certain enumerate of scarce resources. Within the economic system, there areseveral types of economies, each generating a different take ofefficiency. It is said that an economic system that has allocativeefficiency, cultivable efficiency, and beauteousness will be effective. Along with the latter mentioned, the division of labour andcomparative advantage, when exploited also bring about theeffectiveness of a system.Within an economic system there are two contrasting ideals the market deliverance and the planned economy. A free-market or laissez-faireeconomy makes decisions on an individual level wi th minimal governmentintervention. On the other hand of the spectrum lies the plannedeconomy where all economic decisions are made by the government(Sloman, 2001). Both economies pee their advantages anddisadvantages. In a free-market economy there is emancipation of choice,high incentives, and the belief in consumer sovereignty, yet, thereare problems such as inequality of income, macroeconomic instability,and the demote of market failure. Likewise, though a planned economyhas advantages such as low levels of unemployment and equaldistribution of income, there is a loss of personal freedom and lackof consumer choice. Many people feel that efficiency lies in thefree-market economy where one can easily answer the questions whatshould be produced, how it should be produced, and for whom. However,the problem with this capitalistic economy is that poverty and boomand bust cycles reduce progress (Economic Systems How Societies adaptto Problems, 2003). If you care about economic effici ency, youshould like free marketsBut they would also accept the second oneshould be qualified, in addition to its stabilisation and distributionfunctions, governments will be needed to correct marketimperfections (Rhoads, 1999, p.66) Rhoads (1999) mentions how amarket economy leans towards more efficiency but needs the governmentsporadically, a combination which makes the so-called mixed economy. A mixed economy which leans towards laissez-faire, as in the courtship withthe U.S or the United Kingdom, is rather successful. On the contrary,countries, such as Burma or North Korea, which slant towards a plannedeconomy, lack progress.Along with allocative efficiency, how resources should be allocated,productive efficiency, which production method should be utilised, andequity, specialisation and exchange are both necessary to have anefficient economy (Demmert, 1991 p.3). Specialisation comes in the