Quiz 3: Economic Institutions

Business

Socialist economy is an economy where the market decisions like allocation and management of resources, production and sale of goods and services, etc. are decided by the society or the representatives of the society. Market economy or capitalism is an economy where the private property laws are strong and market is governed by market forces to manage the market activities. A socialist economy has primary objective which is concerned with welfare of all the people in society so when the discussion is about a family then the socialist view is seen because a family takes care of each other over and above their selfish needs, which is objective of socialism as well. The primary objective of a market economy is self-interest i.e. taking care of itself first without worrying for others. Primary objective of business is also to earn profits legally at any cost, therefore, for a business to run successfully capitalist view is desirable one.

Socialist economy is an economy where the market decisions like allocation and management of resources, production and sale of goods and services, etc. are decided by the society or the representatives of the society. Market economy or capitalism is an economy where the private property laws are strong and market is governed by market forces to manage the market activities. a.If government tries to support children by providing then food vouchers, free-daycare and public school then this intervention will increase the financial burden on government substantially. This would lead to increase in tax burden of the country because government will get revenue from taxes to finance the program. It will reduce the quality of public education because entrepreneurial innovation will now not be there. b.The government interference will now change the planning of family choices as now people will not care about the expenses on child food and education and they would divert these resources either into tax or in other expenditures.

Market economy is an economy where the private property laws are strong and market is governed by market forces to manage the market activities. In a market economy, the price mechanism is the central coordination system because it is the fluctuations of price of a good or service which intimates the supplier and buyer about the success of the good, and this price mechanism is basically dependent upon the demand and supply of good. If good is demand too much or supplied too less then the price is high and it is demanded too less or supplied too much then the price will be