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ECONOMIC SYSTEM - Coggle Diagram
ECONOMIC SYSTEM
MIXED ECONOMY
An economic system which combines both capitalism and socialitism to solve basic economics problem
MERITS
-High employment of resources
-Provision of public goods
-Consideration of social costs and benefits
-Help for vulnerable groups
-Encouragement of merit goods
DEMERITS
-Unemployment of resources
-Not all externalities considered
-Imperfect competition
-Lack of competition in the public sector
-Lack of incentives in the public sector
-State bureaucracy
CHARACTERISTICS
-Government amd individuals share the desicion making process
-Government guides and regulates production of goods and services offers
-Individuals own means of production
-Protect consumers and workers from unfair policies
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SOCIALISM
An economic system where all the economic decisions are made by the government or a central authority
CHARACTERISTICS
-Public ownership of resources
-Central planning authority
-Price mechanism is less important
-Central control and ownership
DEMERITS
-Lack of incentives and initiative by individuals
-Loss of economic freedom and consumers sovereignty
-Absence of competition
-Waste of economic resources
MERITS
-Production according to basic need
-Equal distribution of income and wealth
-Better allocation of resources
-No serious unemployment or inflation
-Rapid economic development
-Social welfare
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CAPITALISM
An economic system where individuals and sellers make aconomic desicions using a price system
CHARACTERISTICS
-Private ownership of resources
-Freedom of enterprise and choice
-Consumers’ sovereignty
-High competition
-Government intervention
-Price mechanism
DEMERITS
-Inequality of distribution of wealth and income
-Inflation and high unemployment rate
-Lack of social welfare
-Wasteful competition
-Misallocation of resources
-Social cost
MERITS
-Production according to consumers’ needs
-Economic freedom
-Efficient utilization of resources
-Variety of consumers goods
-Enhanced trade,business and R&D
-Automatic incentives
-Flexibility
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ISLAMIC ECONOMY
An economic system which the collection of rules, values and standars of conduct that organize economic life and establish relations of production.
CHARACTERISTICS
-Public and private ownership of resources owned by God
-Price mechanism and limited government
-Distribution of wealth
-Prohibition of interest
MERITS
-Less income inequality
-Helping produces and consumers
-Protecting the economy
-Free enterprise
-Benefits of taxes for social program
DEMERITS
-Islamic laws potentially subject businesses to risk
-Some elements of Islam-derived commercial law can be confusing to non-Muslims
-Legal limits block the muslims business
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