Key Questions Their Economic System example essay topic

Lesson 1 Project Economic Questions and Vision The two major economic systems in the world are the capitalist (free market) economic system and the socialist economic system. The many different countries of the world usually have an economic system in place that contains elements of both capitalism and socialism. Since the philosophies of capitalism and socialism are opposite, an individual country and its economic system will answer key economic questions differently. Regardless of how much that country or society supports either philosophy, the key questions their economic system must answer are the same. One question that must be answered is, what goods will be produced? Another question is how will these goods be produced?

Also there is the question to be answered, for whom will these goods be produced? The location of the economies operation on the production possibilities frontier (PPF) is also very important to production. The PPF is related to what goods are produced which depends on whether the economic system is based on capitalism or whether it is based on socialism. What goods will be produced in a capitalist economic system Is determined by what the market wants. As an example if the buyers and sellers want more computers, televisions, automobiles. houses, and entertainment or food to be produced, then the production of these products will take place. (pages 56, 57, 58, and 59 of Economics 6th edition by Roger A. Arnold) In the capitalist economic system the sellers usually respond to the buyers changes in wants or preferences also. Goods and services are produced when enough buyers exist that desire to buy those goods and services.

If buyers start wanting more of a certain product than another, production usually shifts to meet the need. Capitalism is based on the concept of free enterprise and the principle of individual rights. This means freedom from private and government coercion. Production and trade help to increase the wealth that people need to support their life. In the capitalism system the person who creates the wealth is the owner of that wealth. (web) What goods will be produced in a socialist economic system Is decided by the government in control. The government may or may not be responsive to the wants of the ordinary citizen.

Some economist believe that one of the reasons for the fall of communism in the Soviet Union as well as in Eastern Europe was a decline in economic growth. An example is given in our text where the former Soviet union had tension between the people and the government. The PPF framework shows the government leaders wanting to be at one point while the majority of the people in the Soviet Union wanted to be at another point. The text states that "the majority of the people wanted more consumer goods than the government wanted to produce". (page 50) The Soviet government was more interested in producing military goods. Political instability can arise when a government economic system is located at a point on the PPF (production possibilities frontier) that does not represent where the majority of the people want it to be. (pages 50, 51 of Economics 6th edition by Roger A. Arnold) The socialist believes that the socialist economic system is based on equality and cooperation. The workers own the means of production instead of the rich few owning the means of production such as n the capitalistic economic system.

The means of production includes factories, plant equipment, raw materials, fuel and anything else needed for production outside of labor itself. (web) How will the goods be produced in a capitalist economic system depends on the private producer's decision. The producers could decide on manual labor or automation. In a socialist economic system the government has a large role in deciding how goods will be produced. The government may feel using large collective farming is better than small private farming.

Who will the goods be produced for is based on the persons ability and willingness to pay in the capitalistic economic system. The computer belongs to the person who wants and can pay for that item. In the socialist economic system the government has more control over who gets products. An example is a person receiving goods under the socialist economic system when he or she does not have enough money to pay for the goods. I feel that the capitalistic philosophy offers the greatest benefit to society. The socialistic philosophy supports a utopia type of state that has failed.

The capitalistic philosophy has been adopted around the world and has contributed to advances in technology, more jobs, better communications, and quality of life overall. The free market economic system does the best job of answering the three economic questions discussed in this project.