Presentation on

Presented by
Dhanya sree
Ghaya
 An economic system refers to the way in which
the resources of the country are used to produce
goods and services, and the manner in which these
goods and services are distributed for consumption.
 It addresses problems like allocation or scarcity
of resources.
Cont……
• When deciding how to use it’s limited
resources, every country has to answer the
following 3 questions:
1. what to produce?
2. How to produce?
3. For whom to produce?
An economic system is a
way of answering this questions
1) Capitalism or private Enterprise Economy
2) Socialism
3) Communism
4) Mixed economy
 It is one of the oldest economic system.
 Production is owned by private individuals
 Profit is the main motive
 Right to private property
 Profit motive
 Freedom of choice
 Market forces
 Minimal role of Government
 Increase in productivity
 Increase in standard of living
 Proper use of resources
 Technological improvement
 Flexible system
Inequalities
Leads to monopoly
Exploitation of labor
Mechanization and automation
 Introduced by Karl Marx and Fredric Engles
in their book “ the communist Manifesto”
 Socialism means ‘ All things to all men’
 Government ownership
 Social welfare motive
 Lack of competition
 Positive role of government
 No labour exploitation
 Proper utilization of resources
 Social welfare
 Rapid economic development
 No cyclical fluctuations.
 Burden on government
 Rigid economy
 Evils of bureaucracy
 Non- existence of competition
• An economic system in which both the
private enterprise and a degree of state
monopoly (usually in public services,
defense, infrastructure, and basic industries)
coexist.
• All modern economies are mixed where the
means of production are shared between the
private and public sectors, also called dual
economy.
 Co-existence of private and public sectors
 Existence of joint sector
 Planned economy
 Freedom
 Optimum use of resources
 Competition and efficient production
 Economic development
 Lesser economic inequalities
 Corruption and black marketing
 Unhealthy competition
 No freedom to private sector
 Unemployment
Economic Solution
system
Capitalist Determined by consumer purchasing
power
economy
Socialist Determined by government
Economy
Mixed Price- mechanism, government
produced goods that are not produced
Economy by private sector.
Economic system Solution

Capitalist Firms will choose a combination of production

factors to minimize costs.
Economy

Socialist Based on government’s goal of achieving

maximum output .
Economy
Mixed Firms will choose the production method that
will maximize profits and minimize costs.
Economy
Economic system Solution

Capitalist economy Determined based on individual purchasing

power

Socialist economy Goods are distributed evenly and fairly

Mixed economy Determined by price- mechanism

 Capitalist Socialist Mixed
Particulars Economy economy Economy
Private ownership Government private +
Ownership and control ownership and government
control ownership

Profit maximization Collective welfare Profit maximization

Objective social & collective welfare
social

price- mechanism planning Government as

Decisions or market- commission on well as market
mechanism behalf of
government

Consumer is king Welfare promotion Protects individual

Motive is primary motive freedom