An economic system is the structure of production, allocation of economic inputs, distribution of economic outputs, and consumption of goods and services in an economy. It is a set of institutions and their social relations. Alternatively, it is the set of principles and techniques by which problems of economics are addressed, such as the economic problem of scarcity through allocation of finite productive resources. Due to the problem of scarcity, every economic system be it capitalist, socialist or any other economic system, needs to function to satisfy societal needs. Given such scarce resources, it believed that choices must be made as to what to produce, how much of each commodity to produce, how to produce it and for whom. Every society sets up some means for answering its fundamental economic questions. This entity is called the economic system Economic system refers to the means by which decisions involving economic variables are made in a society. In this light, a society’s economic system determines how the society answers its fundamental economic questions of what to be produce, how the output is to be produced, who is to get this output and how future growth will be facilitated, if at all.
No comments:
Post a Comment