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Economic System <ul><li>Economics -  Economics  is the social science that analyzes the production, distribution and consu...
An  economic system  is the combination of the various agencies, entities  that provide the economic structure that guides...
<ul><li>Economic System  : An organized way in which a state or nation allocates its resources and distributes goods and s...
<ul><li>Types: </li></ul><ul><ul><li>Capitalism (Market Economy) </li></ul></ul><ul><ul><li>Socialism (Planned economy) </...
Capitalism
<ul><li>Capitalism  is an economic system in which the means of production are privately owned and operated for profit, us...
<ul><li>ADAM SMITH called “the obvious and simple system of natural liberty” (Book:  Wealth of Nations ).  </li></ul><ul><...
<ul><li>Mercantile System </li></ul><ul><li>Production Factors in Government hands </li></ul><ul><li>Export emphasis </li>...
<ul><li>Benefits of Capitalism </li></ul><ul><ul><ul><li>In years 1000–1820 world economy grew six-fold, in years 1820–199...
<ul><li>Major limitations/ Criticism: </li></ul><ul><ul><ul><li>Downfall of work ethics </li></ul></ul></ul><ul><ul><ul><l...
Socialism
<ul><li>Collective ownership and democratic control of the material means of production  by the workers and the people </l...
<ul><li>Socialism as we know it today, most commonly refers to  &quot;market socialism,&quot;  which involves individual m...
<ul><li>Features of Socialism; </li></ul><ul><ul><li>Social Ownership of means of production </li></ul></ul><ul><ul><li>Ex...
<ul><li>Benefits of Socialism </li></ul><ul><ul><li>Better salaries </li></ul></ul><ul><ul><li>Stable Environment </li></u...
<ul><li>Criticism of Socialism </li></ul><ul><ul><ul><li>Distorted price signals </li></ul></ul></ul><ul><ul><ul><li>Suppr...
COMPARISON
COMPARISON..
BASIS OF DIFFERENCE CAPITALIST ECONOMY SOCIALIST ECONOMY Resources Ownership Privately owned State owned Foundation belief...
Mixed Economy <ul><li>Any economy in which private corporate enterprises and public sector enterprises exist side-by-side,...
<ul><li>Provides a clear demarcation of the boundaries of public sector and private sector so that the core sector and str...
<ul><li>Features </li></ul><ul><ul><ul><li>Resources are owned both by the government as well as private individuals. i.e....
<ul><li>Advantages </li></ul><ul><ul><ul><li>Producers and consumer have sovereignty  to choose what to produce and what t...
 
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Capitalism, socialism & mixed economy

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Capitalism, socialism & mixed economy

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Transcript of "Capitalism, socialism & mixed economy"

  1. 1. Economic System <ul><li>Economics - Economics  is the social science that analyzes the production, distribution and consumption of goods & services. </li></ul><ul><li>Economic System  is the system of production, distribution and consumption </li></ul><ul><li>An economic system is a mechanism (also defined as system or social institution) which deals with the production, distribution and consumption of goods and services in a particular society. </li></ul><ul><li>The economic system is composed of people, institutions and their relationships. It addresses the problems of economics like the allocation of the resources. </li></ul>
  2. 2. An  economic system  is the combination of the various agencies, entities that provide the economic structure that guides the social community. 
  3. 3. <ul><li>Economic System  : An organized way in which a state or nation allocates its resources and distributes goods and services in the national community. </li></ul>
  4. 4. <ul><li>Types: </li></ul><ul><ul><li>Capitalism (Market Economy) </li></ul></ul><ul><ul><li>Socialism (Planned economy) </li></ul></ul><ul><ul><li>Mixed (Capitalism + Socialism) </li></ul></ul>
  5. 5. Capitalism
  6. 6. <ul><li>Capitalism is an economic system in which the means of production are privately owned and operated for profit, usually in competitive markets. </li></ul><ul><li>In other words; An economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations. </li></ul><ul><li>OR </li></ul><ul><li>Capitalism is the social system which now exists in most countries of the world. Under this system, the means for producing and distributing goods (the land, factories, technology, transport system etc) are owned by a small minority of people. We refer to this group of people as the capitalist class. The majority of people must sell their ability to work in return for a wage or salary (who we refer to as the working class.) </li></ul>
  7. 7. <ul><li>ADAM SMITH called “the obvious and simple system of natural liberty” (Book: Wealth of Nations ). </li></ul><ul><li>Subject to certain restrictions, individuals (alone or with others) are free to decide where to invest, what to produce or sell, and what prices to charge. There is no natural limit to the range of their efforts in terms of assets, sales, and profits; or the number of customers, employees, and investors; or whether they operate in local, regional, national, or international markets. </li></ul>
  8. 8. <ul><li>Mercantile System </li></ul><ul><li>Production Factors in Government hands </li></ul><ul><li>Export emphasis </li></ul><ul><li>Capitalist System </li></ul><ul><li>(Adam Smith) </li></ul><ul><li>Centralized to Decentralized system </li></ul><ul><li>Authoritarianism to representative democracy </li></ul><ul><li>Free flow of resources </li></ul><ul><li>People strive for self interest in free market </li></ul><ul><li>Beneficial for society </li></ul><ul><li>Based on Demand & Supply Forces </li></ul><ul><li>Monopoly to Competitiveness </li></ul><ul><li>Self sufficiency to International interdependence </li></ul><ul><li>Producer interest to customer power </li></ul>
  9. 9. <ul><li>Benefits of Capitalism </li></ul><ul><ul><ul><li>In years 1000–1820 world economy grew six-fold, in years 1820–1998 world economy grew 50-fold </li></ul></ul></ul><ul><ul><ul><li>Provides Choice to customers </li></ul></ul></ul><ul><ul><ul><li>Provides valuable goods and services </li></ul></ul></ul><ul><ul><ul><li>Capitalism actively rewards positive traits like hard work </li></ul></ul></ul><ul><ul><ul><li>Similarly, it punishes negative traits such as laziness and theft </li></ul></ul></ul><ul><ul><ul><li>Narrows the gap between common person and wealthy </li></ul></ul></ul><ul><ul><ul><li>Provides opportunity to realize dreams and desires </li></ul></ul></ul><ul><ul><ul><li>Capitalist societies usually do not have large black markets </li></ul></ul></ul><ul><ul><ul><li>Build on democracy </li></ul></ul></ul><ul><ul><ul><li>Social Good </li></ul></ul></ul>
  10. 10. <ul><li>Major limitations/ Criticism: </li></ul><ul><ul><ul><li>Downfall of work ethics </li></ul></ul></ul><ul><ul><ul><li>Free Market + Self Interest </li></ul></ul></ul><ul><ul><ul><li>Accumulation of wealth </li></ul></ul></ul><ul><ul><ul><li>Encourages inequality in a society </li></ul></ul></ul><ul><ul><ul><li>Business lobbying with government </li></ul></ul></ul><ul><ul><ul><li>Monopolistic tendency </li></ul></ul></ul><ul><ul><ul><li>Human resource exploitation </li></ul></ul></ul><ul><ul><ul><li>Results in great disparities between income of people owning the capital resources and others </li></ul></ul></ul>
  11. 11. Socialism
  12. 12. <ul><li>Collective ownership and democratic control of the material means of production by the workers and the people </li></ul><ul><li>Socialism is a term applied to an economic system in which property is held in common and not individually, and relationships are governed by a political hierarchy. Common ownership doesn't mean decisions are made collectively, however. Instead, individuals in positions of authority make decisions in the name of the collective group. </li></ul><ul><li>Socialists argue that socialism would allow for wealth to be distributed based on how much one contributes to society, as opposed to how much capital one holds. </li></ul><ul><li>A primary goal of socialism is  social equality  and a  distribution of Wealth based on one’s contribution to society and an economic arrangement that would serve the interests of society as a whole. </li></ul>
  13. 13. <ul><li>Socialism as we know it today, most commonly refers to &quot;market socialism,&quot; which involves individual market exchanges organized by collective planning. </li></ul><ul><li>Difference between socialism and communism is that communists directly oppose the concept of capitalism, an economic system in which production is controlled by private interests. Socialists, on the other hand, believe socialism can exist within a capitalist society. </li></ul>
  14. 14. <ul><li>Features of Socialism; </li></ul><ul><ul><li>Social Ownership of means of production </li></ul></ul><ul><ul><li>Existance of public sector </li></ul></ul><ul><ul><li>Decisive role of Economic Planning </li></ul></ul><ul><ul><li>Production guided by Social Benefits </li></ul></ul><ul><ul><li>Abolition of exploitation of labour </li></ul></ul>
  15. 15. <ul><li>Benefits of Socialism </li></ul><ul><ul><li>Better salaries </li></ul></ul><ul><ul><li>Stable Environment </li></ul></ul><ul><ul><li>Eliminates poverty </li></ul></ul><ul><ul><li>Better Products </li></ul></ul><ul><ul><li>Fulfills survival need </li></ul></ul><ul><ul><li>Opportunity for citizens to explore non-economically-productive pursuits </li></ul></ul>
  16. 16. <ul><li>Criticism of Socialism </li></ul><ul><ul><ul><li>Distorted price signals </li></ul></ul></ul><ul><ul><ul><li>Suppression of economic democracy </li></ul></ul></ul><ul><ul><ul><li>Slow Technological advancements </li></ul></ul></ul><ul><ul><ul><li>Minimize self management </li></ul></ul></ul><ul><ul><ul><li>Reduced incentives </li></ul></ul></ul>
  17. 17. COMPARISON
  18. 18. COMPARISON..
  19. 19. BASIS OF DIFFERENCE CAPITALIST ECONOMY SOCIALIST ECONOMY Resources Ownership Privately owned State owned Foundation belief competition brings out the best in people cooperation is the best way for people to coexist Earning of wealth everyone works for his own wealth everyone works for wealth which is distributed equally to everyone Market Scenario Level playing field Protection to PSUs, Private enterprises are permitted in few businesses only Govt. interference Only in situations where laws have been broken Fully involved Employees motivation Highly motivated on account of proportional benefits Rarely motivated as performance is not rewarded Merit Perception of better economic growth because of competition Equal distribution of income results in welfare of all Demerit Few individuals/groups attain powers, rest are exploited Hard work is not rewarded, lazy employees also enjoy equal level of benefits
  20. 20. Mixed Economy <ul><li>Any economy in which private corporate enterprises and public sector enterprises exist side-by-side, and decisions taken through market mechanism are supplemented by some form of partial planning, is to be described as a mixed economy. </li></ul><ul><li>This system overcomes the disadvantages of </li></ul><ul><li>both the market and planned economic systems. </li></ul>
  21. 21. <ul><li>Provides a clear demarcation of the boundaries of public sector and private sector so that the core sector and strategic sectors are invariably in the public sector. </li></ul><ul><li>The government intervenes to prevent undue concentration of economic power, and monopolistic and restrictive trade practices </li></ul><ul><li>The rights of the individual are respected and protected subject only to the requirements of public law and order and morality </li></ul>
  22. 22. <ul><li>Features </li></ul><ul><ul><ul><li>Resources are owned both by the government as well as private individuals. i.e. co-existence of both public sector and private sector. </li></ul></ul></ul><ul><ul><ul><li>Market forces prevail but are closely monitored by the government. </li></ul></ul></ul><ul><ul><ul><li>Monopolies  may be existing but  under close supervision  of the government. </li></ul></ul></ul>
  23. 23. <ul><li>Advantages </li></ul><ul><ul><ul><li>Producers and consumer have sovereignty  to choose what to produce and what to consume but production and consumption of harmful goods and services may be stopped by the government. </li></ul></ul></ul><ul><ul><ul><li>As compared to Market economy, a mixed economy  may have less income inequality  due to the role played by the government. </li></ul></ul></ul><ul><ul><ul><li>A mixed economy represents an achievable balance between individual initiative and social goals. </li></ul></ul></ul>
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