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Economic Systems

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The roles that Individuals, businesses, and the government play in allocating a society’s resources depend on the society’s economic system. This system is a basic set of rules for allocating the country’s resources to satisfy its citizens’ needs. Economic systems are generally categorized as either free market systems (capitalism) or planned systems (socialism and communism). Except for the theoretical extremes, the lines of each system tend to be a bit blurred (Bovee & Thill, 2013). Capitalism is where the citizens have private ownership of production means. This means that an individual is free to produce, and sell their product or services how they see fit. Communism is where the government controls all recourses of production while the citizens all make an equal wage regardless of the carrier field they work in. Socialism lies somewhere in between the two.

The government ownership focuses on vital industries for the common welfare of that nation, while private ownership is allowed in other industries (Bovee & Thill, 2013, p. 29). In this paper we will evaluate and analyze some different situations, determine which economic systems would work best in the situation and why. Which Economic System is Best Suited for Handling a Crisis of Epic Proportions? The key to any economic system responding to a crisis of epic proportions would be to have PACE plan for every situation that may happen. A PACE plan stands for primary, alternate, contingency, and emergency; basically four different plans of attack on the same situation. Now considering every economy/nation is reactive this never happens. A Planned system would be best due to the fact the government controls some or all of the nation’s vital resources.

By controlling the resources one person can dictate how to deal with the crisis by responding with the nation’s resources. The more centralized the decision making process is the faster the response times will be (Bovee & Thill, 2013, p. 30). A Socialist System is the Best at Responding to an Emergency Situation. On 12 January 2010 a catastrophic earthquake measuring 7 on the Richter scale hit Haiti. Many countries responded to the appeals for humanitarian aid sending rescue and medical teams, engineers and support personnel. Confusion over who was in charge hampered early relief work; delays in aid distribution led to angry appeals from aid workers and survivors, and looting and sporadic violence were observed (“Wikipedia,” 2010).

Socialism would work best because one person would control the vital resources such as the Federal Emergency Management Agency (FEMA) or the National Guard. That one person would dictate how to respond with the nation’s resources appropriately. By centralizing the nations decision making process this would allow for faster response times to get emergency aid on the ground. A socialist system would still allow private corporations to respond with additional aid, weather that’s private security to help the state and local police control the situation or contractors that would help rebuild the affected area. Supply and Demand

Supply refers to the amount of goods or service that producers will provide on a certain date at a various prices, while demand refers to the amount of goods or services that the consumer will buy on a certain date at various prices (Bovee & Thill, 2013). Ever wonder why the price to heat or home increases drastically in the winter time? The simple answer is that people want to stay comfortable so they are willing to pay a higher price for that. Commodities can be relatively inexpensive due to the fact there is an abundant amount of the commodity, but as the demand increases for that commodity so does the price.

A good example would be heating oil in the north east. In the summer months no one needs to heat their homes and this drives the price way down because the suppliers still want to earn a living off it. However as winter approaches the consumer wants to prepare to heat their house so the demand for heating oil starts to increase. As the demand increases the supply in theory starts to decrease which in turn makes the price increase to the equilibrium point. If the price of the heating oil is too high then people will seek alternate means to heat their homes and the supplier will lose money. The equilibrium point is the point at which quantity supplied equals the quantity demanded (Bovee & Thill, 2013). Conclusion

In conclusion a planned economic system such as Socialism was evaluated and determined that it is better suited to respond to Crisis of epic proportions because one person is in charge and would dictate how the nation’s resources are allocated toward the situation. A good example would be the 2010 Haitian earthquake (“Wikipedia,” 2010). Additionally we analyzed the laws of supply and demand, and discussed why the prices increase as the demand for the product increases until they reach the equilibrium price.

2010 Haiti earthquake. (2010). Retrieved from http://en.wikipedia.org/wiki/2010_Haiti_earthquake Bovee, C., & Thill, J. (2013). Understanding basic economics. In S. Yagan (Ed.), Business in Action (6th ed., pp. 28-45). [Bookshelf]. Retrieved from http://devry.vitalsource.com/#/books/9781269588669/pages/94081221

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