Business and Economic systems

For
long countries, the world has sought better ways of allocating and harnessing
their God given and productive resources. Many rely on nature, others rely on
their steer capabilities and ingenuity to produce goods and services have no
value in themselves if they are not exchanged for the purpose of creating
satisfaction.

Hence, demand and supply forces shape the price mechanism in any
free market economy.

Every
society is usually confronted, though in varying degrees, with three basic but
interrelated economic problems. These problems are:
1.     
What commodities and services should be produced and in what quantity
and qualities?
2.     
How should the goods and services be produced?
3.     
For whom should the goods and services be produced?
These
questions arise because resource is scare in relation to want. Though these
questions are common to all communities, the methods adopted for dealing with
them vary considerably considering the historical experience, political systems
and cultural values of the people concerned.
In
the context of the above observations, an economic system may be define as “The
institution framework which a given nation or group of nations has chosen or
accepted as the means through which available scarce resources are allocated
and utilized for the satisfaction of human wants.”
Types of Economic Systems
Two
somewhat contrasting types of economic systems have often been identified.
These are:
1.     
Capital Economic System – market economy or free enterprise economy
2.     
Socialist Economic System – planned economy, command economy or state
controlled economy.
However, there exists a middle-of-the-road economic system known as:
3.     
The mixed economy – which incorporates some of the elements of two
dominant economic systems identified below.
Nigeria
belongs to the third category of economic system. This is evident in government
participation in business.
Although
this has been justified as necessary because government cannot leave in the
hands of the public certain very sensitive and value delivering organizations
which include produce or provide social amenities as water, power, roads,
telecommunications etc.  But in the light
of current Obasanjo government’s policy of privatization, one can notice a
slight deviation towards the capital system.
The Capitalist Economic System
The
capitalist system is one that guarantees freedoms and incentives to individuals
to follow their interest either as workers, investors or customers. In other
words, the capitalist economic system is one ion which individuals are free to
own and control means of production. Thus, in the capitalist economic system,
there is freedom of enterprise, freedom of production and of consumption. This
type of economic system is best exemplified by the economies of the USA,
Canada, and Britain
Features
of the Capitalist System
The
following features characterize the capitalist economic system
1.     
Private property: this is a fundamental attribute of the capitalist
system and it gives passion and drive to individuals living in that economy to
strive for property ownerships. It recognizes the right of an individual or
group to acquire something of economic importance by legitimate means and to
use and dispose of it in any manner considered suitable
2.     
Inheritance: this is another important feature of the capitalist system.
Inheritance is essential for the existence of the capitalist system because it
provides a powerful incentive for the accommodation and conservation of wealth.
3.     
Freedom of enterprise: freedom of enterprise is in fact an extension of
the concept of private property discussed above. Freedom of enterprise gives
individuals or groups, the right to freely select the line of economic
activities in which to invest their resources.
4.     
Competition: this is another in built feature of the capitalist economic
system. In its pure form, competition refers to the presence of many buyers or
sellers of goods and services of productive agent in such large numbers that
the action of one buyer or seller does not influence the market price of any
commodity, service or productive agent.
5.     
Price system: this in the capitalist economic system as a guide to
coordinate the activities of buyers and sellers thereby ensuring that the
balance of demand and supply is achieved from time to time

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