Economic Systems Essay

Within the activity parameters of the economy, there come the economic systems. Economic system may be defined as an array and the nature of the interactive forces of the economic activity in the pursuit of the broad national resources in methods and means that brings the most optimal allocation within the economic units. In studying this concept, it remains solely an important factor to put into consideration the aspect of the limited resources. This attribute in an important enterprise that work to define the situational mobility in the use of these resources by the members of the society. In terms of economic systems, the capitalistic and socialist economies have certain features that may be voted as advantages and disadvantages in relation to one another. Since the ages of industrial revolution, these two systems have been developed. In the American enterprise, they have remarkably been in application. To define capitalism firstly, it is the market economic systems in which the decision about the market are decentralized to the firms and economic units with only a complimented influence by the government in supply of the public goods such as justice and national defense. The provision of the products and services are a decision by the owners of the factors of production (firms) that make rational decisions about what to produce, how much, when and whom to produce for. There is private ownership of the factors of production by firms with the main goal being profit maximization. (Foley, Pyle, 2003) On the other hand, socialist economy is the case where the resource package of the economy is deemed to be owned solely by the central government. The economy depicts a well planned system, with equality and equity been the presumptive decisions. Capitalistic economy is based on political frontiers which dictate that the ownership of the factors used in production is in the hands of the firms which use various investments schedules to increase their profit. In the due to process to strike a balance between these two systems, it is important to analyze the efficiency precept of the capitalistic economy. At one level, through personal persuasion in the conscience of his personal interest within the economy, he/she will help to bring a success to the broad economy as a whole and consequently benefit one another. When people choose to act on personal grounds without government regulation, there is a higher creation in the wealth factor by them then the consequence laxity that may be brought about if the ownership of these resources is by the government. Respect to more efforts into the economic activity at the personal level, the living standards will consequently improve. (Barnett, 2005) Within the economic framework, are the firms who own the limited factors of production. The economic activities are broad and intense with various packages of commodities and services as output. The market itself is competitive in nature with the price determination under the control of the existing forces of the market supply as well as the demand. Price level defines the level of consumption of the products by the rational consumers. When the prices are up, the consumers lower the level of consumption with the opposite still holding. However, in the capitalistic system, the price is determined by these forces which are never exploitation to the consumers or a loss to the firms. The equilibrium point between the demand function and the supply yields the equilibrium price. Sheridan, 1998) Generally, the national resources that involve both natural and human resources are limited. Consequently, such limitation to the level of resources implies the need for maximum exploitation. However, the capitalistic system is evident in the efficient exploitation and the use of these resources. At one level, these resources are owned solely by the firms. With the high population of such firms against the little package of the existing resources, there is an optimal subdivision of such resources between the firms. In there bid to create wealth on personal dimensions, the firms involve themselves in persuasive activities aimed at optimizing the scale of the available resources. On another scale, this can be related to the motivational aspect developed to them as reasoned to them been the owners of the state resources. Through this ownership, they apply various economies of scales and investment pattern that are adapted to providing the most optimal and efficient scale of output. Private ownership of resources seeks to fight the weaknesses found in the state ownership where there is generally a suboptimal scale in such resource use. Consequently therefore, the capitalist system signifies efficiency through optimal allocation of resources (Nash, 2003) Within their operation, is the competitive market comprised of many producers. The operating system is dictated by the market forces. For an optimal point within the equilibrium, the level of supply should be consistently equal to the level of demand. The assumption of a rational consumer is still prevalent with them choosing the best quality of product against the equilibrium quantity of demand and the supply. With their competitive nature, the firms employ the use of various methods aimed at improving the competitive age of their product. High quality increases this competition. With this factor in their mind, the firms employ various tools for achieving its success. Firstly, firms within this market are highly involved in market research. With this implement, they are able to study the market requirements in correspondence to the demand. Either, the aspect of innovation is highly developed with intense research on product competing within the market. Due to the competitive nature of this market, the firms are able and willing to invest more in the innovation process of their products which helps to create a reasonable state on their competition portfolio. Consumer sovereignty is an equally important tool. At the market place, consumer sovereignty implies the capacity under which the consumers are willing to consume the most desirable level of commodity at the prevailing optimal prices without any external dictate by the producers. Consumer sovereignty is synonymous to reducing their exploitation. However, exploitation comes when the supplies/firms wants to take various sales advantages in the sales activity to the consumers through increase in the prices of products. Due to the market forces, the capitalist system attempt to safeguard the interest of such consumers through the equilibrium determination of the price factor (Gianaris, 1993) Either, capitalist economy is a remedy to the weakness of lack in equal distribution of he available resources by the socialist economy. At times, the distribution of such resources by the socialist economies may be suboptimal. The capitalist economies come in to safeguard the interest of the people in the case of failed equal resource distribution by the socialist economy. To conclude, the capitalist economic system is a fundamental displine that is credited with various efficiencies. Such efficiencies help to rationalize the resource factor, the product output and the consumption pattern within the economic layout.