Economic System Models

             Companies can save money - there is no need to employ a staff to see what to, how and for whom to produce. They can see the consumers and other producers and decide themselves.
             The market will produce a wide variety of goods and services to satisfy the wants of the people. This is also a way to get the most money out of them. .
             DISADVANTAGES.
             Factors of production will be employed only if they are profitable. Labour is also a factor of production. This means if it is no longer profitable to make watches for a producer, they will fire all the employees at the watch making company. This leads to unemployment.
             The Free Market System gives more of the share of products to the people with the money - People who are rich will be able to buy more than the people who will have less money.
             Social effects of production may be ignored - The harm the business causes to the society will be ignored by the businesses and there will be no government to put a stop to it. For example, a factory producing toxic waste.
             The Free Market System may fail to provide some goods and services - These are like Police and street lighting. Everyone will enjoy the benefit of them but few will want to pay.
             One final note on Market Economic Systems is that there is no real-life example of a Market Economy. America comes closest to this, but even there many services such as defence and police are managed by the government, making America into a Mixed Economic System, which we will discuss later.
             PLANNED ECONOMIC SYSTEM.
             In the Soviet Era, countries like Poland, Hungary, Romania and Russia tried to lay down plans for what was to be produced, how it was to be produced and for whom it would be for. All these countries were following an economic system known as the Planned Economic System. This system is also known as Command Economies or Communism.
             In this type of economy, the producers and consumers had no choice over what was being produced and was being bought in the market, nor do they have any power over what is being charged on these products.