This document defines business systems and economic systems. It discusses the external environment, types of economic systems including planned, market, and mixed economies. It also describes degrees of competition like monopoly, oligopoly, and monopolistic competition. Finally, it covers concepts like inflation, unemployment, recession, and depression that impact economic stability.
2. CONTENTS
2
• Definition
• External Environment
• Economic system
• Types of Economic system
• Degrees of competition
• Economic stability
• Inflation
• Unemployment
• Recession
• Depression
• Conclusion
3. DEFINITION
3
Business:
organization that provides goods or services to earn profits.
Business systems:
A system is a defined set of principles,
practices and procedures that are applied
to specific activities to achieve a specific result.
4. EXTERNAL ENVIRONMENT
4
• Everything outside an organization’s
boundaries that might affect it.
• Its composed of all the outside factors or
influences that impact the operation
of business.
• the micro environment and the macro
environment.
5. ECONOMIC SYSTEMS
5
• a nation’s system for allocating its
resources among its citizens, both
individuals and organizations.
• It includes the combination of the
various institutes, agencies, entities,
decision-making processes and patterns
of Consumption
6. TYPES OF ECONOMIC SYSTEMS
6
Planned Economy:
• A centrally planned economy, also known as a command
economy.
• an economic system in which a
central authority, such
as a government, makes economic
decisions regarding the
manufacturing and the
distribution of products.
7. TYPES OF ECONOMIC SYSTEMS
7
Communism:
• a political system in which the government owns and operates all
factors of production.
• Individual people can not own properties and industries.
• People of all social classes are treated equally.
• Theoretically, there no unemployment communist countries
8. TYPES OF ECONOMIC SYSTEMS
8
Socialism:
• a planned economic system in which the government owns and
operates only selected major sources of production.
• In a purely socialist system, all legal production
and distribution decisions are made by the government.
• individuals rely on the state for everything from food to healthcare.
• The government determines the output and pricing levels of these
goods and services.
9. TYPES OF ECONOMIC SYSTEMS
9
Market economy:
• individual producers and consumers control production and
allocation by creating combinations of supply and demand
• There may be some government intervention or central planning
• usually this term refers to an economy
that is more market oriented in general.
10. TYPES OF ECONOMIC SYSTEMS
10
Capitalism:
• an economic and political system in which a country's trade and
industry are controlled by private owners for profit, rather than by
the state.
• encourages entrepreneurship by offering profits as an incentive.
• The purest form of capitalism is free market.
Here, private individuals are unrestrained.
• They may determine where to invest, what to produce or sell, and at
which prices to exchange goods and services.
11. TYPES OF ECONOMIC SYSTEMS
11
Mixed Market Economy:
• features characteristics of both planned
and market economies.
• Mixed economies typically maintain
private ownership and control of most
of the means of production, but
often under government regulations.
12. TYPES OF ECONOMIC SYSTEMS
12
Privatization:
• process of converting government enterprises into privately owned
companies.
• Privatization generally helps governments save money and increase
efficiency.
• Critics of privatization suggest that basic services, such as education,
shouldn’t be subject to market forces.
13. DEGREES OF COMPETITION
13
Monopolistic Competition:
• Monopolistic competition characterizes an industry in which many
firms offer products or services that are similar, but not perfect
substitutes.
• Firms in monopolistic competition
typically try to differentiate their products
in order to achieve above market returns.
• For example: Restaurants, Clothing, Hairdresser, Tv programs etc.
14. DEGREES OF COMPETITION
14
Oligopoly:
• An oligopoly is a market form wherein a market or industry
is dominated by a small group of large sellers.
• For example, it has been found out that insulin and the electrical
industry are highly oligopolist in the US.
• Government policy can discourage or
encourage oligopolistic behavior.
15. DEGREES OF COMPETITION
15
Monopoly:
• market or industry in which there is only one producer that can
therefore set the prices of its products.
• A monopoly exists when a specific
person or enterprise is the only
supplier of a particular commodity.
• Monopolies can be established by
a government.
16. DEGREES OF COMPETITION
16
Natural Monopoly:
• industry in which one company can most efficiently supply all
needed goods or services.
• A company with a natural monopoly
might be the only provider of a product
or service in an industry.
• In small countries such as New Zealand,
electricity transmission is a natural monopoly
17. ECONOMIC STABILITY
17
Stability:
• condition in which the amount of money available in an economic
system and the quantity of goods and services produced in it are
growing at about the same rate.
• Stability creates certainty and confidence
and this encourages investment in
technology and human capital.
18. ECONOMIC STABILITY
18
Inflation:
• inflation is a general rise in the price level of an economy over a
period of time.
• It is the decline of purchasing power of a given currency over time.
• When the general price level rises,
each unit of currency buys fewer
goods and services.
19. ECONOMIC STABILITY
19
Unemployment:
• Unemployment is a term referring to individuals who are employable
and actively seeking a job but are unable to find a job.
• Unemployment is often used as a measure of the health of the
economy.
• High rates of unemployment are a
signal of economic distress
20. ECONOMIC STABILITY
20
Recession:
• A recession is a term that refers to a significant decline in general
economic activity in a designated region.
• lasting more than a few months, normally visible in real GDP.
• Businesses, investors, and government officials track various
economic indicators that can help predict
or confirm the onset of recessions.
21. ECONOMIC STABILITY
21
Depression:
• A depression is a severe and prolonged downturn in Economic
activity.
• In economics a depression is commonly defined as an
extreme recession that lasts three or more years.
• Depressions are relatively less frequent
than milder recessions
22. CONCLUSION
22
• the roles that Individuals, businesses, and the government play in
allocating a society’s resources depend on the
society’s economic system.
• An economic system is a collection of laws, institutions and,
activities, that provide a framework for economic decision-making.
• Different degrees of competition also plays important role for
business.
• Economic stability creates confidence to invest.
Cuba, North Korea, and the former Soviet Union are examples of countries that have command economies, while China maintained a command economy for decades before transitioning to a mixed economy that features both communistic and capitalistic elements.
Today, the existing communist states in the world are in China, Cuba, Laos and Vietnam
The People's Republic of Bangladesh
The Co-operative Republic of Guyana
Republic of India
North Korea
Federal Democratic Republic of Nepal
Portuguese Republic
The Democratic Socialist Republic of Sri Lanka
The United Republic of Tanzania.
Hong Kong.
Singapore.
New Zealand.
Switzerland.
United States.
Ireland.
United Kingdom.
Canada
Ireland
United Kingdom
Canada
United Arab Emirates
Taiwan
Iceland (57%)
Sweden (52%)
France (52.8%)
United Kingdom (47.3%)
United States (38.9%)
Russia (34.1%)
India – (27%)
China – (20%)