Introduction to Economics

Question a)Reference to the notes, article, internet and any text book on the Economic System, make a comparison between the socialist, capitalist and the mixed economy. Take one nation/country to explain that each economic system used by the nation/country. Your explanation must be including: i. The characteristic of economic system ii. Advantages and disadvantages for three types of economic system iii. How the economic system for each nation/country solve the basic economics problem.

b)Do you think the government should set “ceiling price” and “floor price” for certain goods? (eg. flour, sugar, cooking oil). Explain with reasons. ------------------------------------------------- Republic of Cuba Republic of Cuba is a good example of a socialist country. Republic of Cuba has been using the socialist economic system since 1st of july 1961. The characteristic of a socialist economic system are : * Public ownership of resources * Central planning authority * Price mechanism of lesser importance * Central control and ownership

Besides that, the advantages and disadvantages of the socialist economic system are : Advantages| Disadvantages| - Production according to basic need- Equal distribution of income and wealth- Better allocation ofresources- No serious unemployment orinflation- Rapid economic development- Social welfare| - Lack of incentives and initiative by individuals- Loss of economic freedom and consumer sovereignty- Absence of competition- Waste of economic resources| It's up to the planners a. k. a. the goverment on how to solve the basic economic problem.

But they too, solve the problem based on the three main questions. What to produce? Planners will decide what will be produced. One of the methods used to find out what the consumers want/need is by using a simple way of surveying. How to produce? Planners direct the resources into producing units. Again, planners decide on the quantities of output and methods of production such as labor or capital intensive. For whom to produce? Planner tries to be fair in distributing the output to the economy to make sure everyone gets.

Wages are determined by the planners themselves, which in a way they've determined how much a consumer can consume. ------------------------------------------------- United Kingdom United Kingdom is a capitalist country based on private ownership and free trade. The characteristic of capitalist economic system are : * Private ownership of resources * Freedom of enterprise and choice * Consumer's sovereignty * Competition * Goverment intervention * Price system Besides that, the advantages and disadvantages of capitalist are : Advantages| Disadvantages|.

- Production according to consumer's needs- Economic Freedom- Efficient utilization of resources- Variety of consumer goods- Enhanced trade, business and research and development- Automotic incentives- Flexibility| - Inequality of distribution of wealth and income- Inflation and high unemployment rate- Lack of social welfare- Wasteful competition- Misallocation of resources- Social cost| A capitalist economy solves it's basic economic problem by referring back to the three main questions, "What to produce? " "How to produce" and "For whom to produce? " What to produce? Consumer sovereignty!

Which basically means whatever the consumer wants. Consumers have all the power and a firm will only produce a good if a consumer is prepared to buy it. How to produce? This depends on the firms. The method should be as efficient as possible and prices should be as a low as possible. This is due to the fact that there's a very competitive environment. Assuming perfect competition, firms should be both productively as well as allocatively efficient in the long run. For whom to produce? The answer would be for consumers who are able to buy them. Those with money (the rich) can buy more goods.

Malaysia Malaysia uses mixed economy system. Mixed economy is basically a mix of both socialist and capitalist economic system. The characterisctic of mixed economy system are : * Public and private ownership of resources * Price mechanism and economic plans in making desicions * Goverment intervention in the economy * Co-operation between the goverment, public and business sector * Goverment controls of monopolies Besides that the advantages and disadvantages of mixed economy are : Advantages| Disadvantages|

- Producers and consumer have sovereignty- Adequate incentive to work hard- Resources properly utilized- Rapid development| - Concentration of wealth in few hands- Existence of anti social activities- Wastage of resources- Interest of common man suffers| A mixed economy is a more realistic system since it is a mixed between both of the two extremes (socialist and capitalist) and mixed economy solve it's basic economy problem is by referring on "What to produce? " "How to produce? " " For whom to produce? " What to produce? In mixed economies, the question of what to produce is decided by both the public and private sectors.

The goods produced and the services provided depend on the consideration of social welfare and economic growth. How to produce? The public and private sectors will decide on the techniques of production to be used in the production of the different goods and services. For whom to produce? The distribution of goods and services is also decided by the public and private sectors. The price mechanism does not fully function in mixed economies. In many mixed economies, the goverment intervenes directly through price controls and indirectly through the imposition of indirect taxes and subsidies.

Do you think the government should set “ceiling price” and “floor price” for certain goods? (eg. flour, sugar, cooking oil). Explain with reasons. I think the government should set "ceiling price" and "floor price" for certain goods because both of it have it's own benefits. "Ceiling price" is set below the equilibrium price (maximum price), basically lowering the price of certain goods in order to make these goods affordable for consumers. For an example; a price of regular milk sets price at RM 4.

00 if the market determined price of an average milk is considered to be too high, government should set a price ceiling. Whilst "floor price" set above the equilibrium price (minimum price), increasing the price of certain goods in order to protect the interest of certain unproductive sectors(producers). In short, price ceiling is the maximum price set by the government to protect the consumers while price floor is the minimum price also set by the government but to protect the producers. For an example; minimum wage laws; in this case, employees are the suppliers of labor and the company is the consumer.

When the minimum wage is set higher than the equilibrium market price for unskilled labor, unemployment is created (more people are looking for jobs than there are jobs available). A minimum wage above the equilibrium wage would induce employers to hire fewer workers as well as allow more people to enter the labor market, the result is a surplus in the amount of labor available. The equilibrium wage for a worker would be dependent upon the worker's skill sets along with market conditions. INTRODUCTION TO ECONOMICS ASSIGNMENT 1 NAME: AHMAD AMIRUL HUSNI BIN MOHAMAD ZIN MATRICS NO. : 012012051331.