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TYPE OF ECONOMIC SYSTEM - Coggle Diagram
TYPE OF ECONOMIC SYSTEM
MIXED ECONOMY
CHARACTERISTIC
-Government and individuals share the decision making process
-Government guides and regulates production of goods and services offered
-Protects consumers and workers from unfair policies
-Individuals own means of production
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SOCIALISM
MEANING
-An economic system where all the economic decisions are made by the government or a central authority
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MERITS
-Equal distribution of income and wealth
-Production according to basic need
-No serious unemployment or inflation
-Better allocation of resources
-Rapid economic development
-Social welfare
DEMERITS
-Lack of incentives and initiative by individuals
-Loss of economic freedom and consumer sovereignty
-Absence of competition
-Waste of economic resources
CHARACTERISTICS
-Price mechanism of lesser importance
-Public ownership of resources
-Central control and ownership
-Central planning authority
ISLAMIC ECONOMY
DIMERITS
-Islamic laws potentially subject business to risk
-Connecting to traditional method of business could mean that legal limits block the Muslims businesses
MEANING
-An economic system which combines both capitalism and socialism and follows the principles of Syariah
CHARACTERISTICS
-Public and private ownership of resources owned by God
-Price mechanism and limited government intervention
-Freedom of economic enterprise
-Distribution of wealth
-Prohibition of interest
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MERITS
-Ensures social welfare
-Avoid riba and monopolies
-Equal distribution of wealth and income
-Freedom of ownership resources
CAPITALISM
MEANING
-An economic system where individuals and sellers
make economic decisions using a price system.
CHARACTERISTICS
-Freedom of enterprise and choice
-Private ownership of resources
-Consumers' sovereignty
-Government intervention
-Price system
-Competition
MERITS
-Production, according to consumers’ needs
-Enhanced trade, business and R&D
-Efficient utilization of resources
-Variety of consumer goods
-Automatic incentives
-Economic freedom
-Flexibility
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DEMERITS
-Inequality of distribution of wealth and income
-Inflation and high unemployment rate
-Lack of social welfare
-Misallocation of resources
-Wasteful competition
-Social cost