Understanding Economic Systems: Market, Planned, and Mixed
Economic Systems: An Overview
Resource Allocation
An economic system is the mechanism used to organize economic activity and resolve the economic problems of resource allocation.
Resource allocation: is the set of decision factors for determining the products we use. Every economic entity considers:
- What occurs?: How many inputs and outputs are employed, and the final amount: consumption/production methods, quantity/quality, domestic/international.
- How do I produce?: How to combine the factors of production,
Understanding Production Factors and Economic Systems
Factors of Production
Factors of production are classified into three categories:
- Land (Nature): Resources that nature provides.
- Labor: Physical and intellectual faculties of human beings involved in the production process. Labor is a basic production process.
- Capital (Physical or Real): Includes buildings, factories, machinery, equipment, and other means used in the production process.
- Human Capital: Education and vocational training that increase work performance.
- Financial Capital: Funds needed to
Mercantilism, Free Trade, Globalization, and Companies
Mercantilism
Advantages:
- Capital accumulation through increased holdings of gold and silver (mercantilism), which was a sign of wealth for the nation.
- Emergence of manufacturing production (manufacturing facilities), which is labor-intensive.
- Source of wage labor.
Cons:
- The process of capital accumulation through capital appreciation.
- Relentless pursuit of profits for companies.
- Socioeconomic system is unethical because it favors some and disadvantages others.
Free Trade
Free trade is an economic concept
Read MoreFinancial Information Restatement in Inflation
Classification of Financial Information for Restatement
Financial information is classified for restatement purposes as:
- a) Operation
- b) Funding
- c) Investment
Monetary Effect of the First Update
The monetary effect of the period, resulting in favorable outcomes, will be up to an amount equal to the net financing costs. These costs consist of interest and exchange rate fluctuations, and generally, all concepts grouped within the expenses and financial products accounts. Any surplus will be considered equity.
Read MoreBusiness Growth Factors: Opportunities & Threats
Joint Ventures vs. Strategic Alliances
1. Distinguish between joint ventures and strategic alliances:
- Joint Venture: Occurs when two or more businesses share the costs, risks, control, and rewards of a business project. They often use this to enter foreign markets.
- Strategic Alliance: Two or more businesses cooperate in a business venture for mutual benefit, sharing the costs of product development, for example.
Franchising: Advantages and Disadvantages
2. What are the advantages and disadvantages of
Read MoreInternational Trade: Theories, Benefits, and Regulations
Introduction to International Trade
Modern economic theories about international trade started in the 16th century. We can consider two main doctrines:
- Mercantilism
- Free trade
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of great importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated western countries’ economic policy and discourse from the 16th to late-18th centuries.
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