INTRODUCTION

Economics is the study of how resources are used and how they give feedback to incentives. Can also be defined as a study in decision making or scarcity. It does not deal with money alone it often involves issues like finance and wealth.

Scarcity and choice. Scarcity is the limitation of supplied resources to meet the demand of the people. A decision is when the government and every person are required to choose their need so that limited support is effectively used.

The price mechanism is the interdependency of the supply of goods and services and the price. The price is generally high when the supply is little, and the cost is low when the amount is high.

PURE MARKET ECONOMY

For a pure market, the economy is not controlled externally. An individual has the right to decide on what is being produced, who to provide for and where to get the assets that are required (Deegen & Halbritter, 2018).

Market economy copes with the issue of scarcity by considering the customers’ decision. The customer has the choice to choose what to be produced by the consumer. The producer selects the most efficient way in the production, in terms of cost production. In providing the producer should ensure there is a low cost of manufacture with the scarce resource to meet the demands of the consumer. To whom to deliver to depends on the consumer income, the higher the wages, the higher they will demand the goods. In a case where the customers’ pay is low, the demand will also be weak. In this kind of economy, the consumer has full rights in making decisions. The choice of what to be produced stands with the consumer (Rycroft & R.S, 2017).

The quantity to be produced for a particular product depends on the price dependency. Due to some scarce resources, the consumer needs to have a choice of what is to be provided. The decision demand and supply of the producer one the consumer is affected by the price mechanism. The changes in prices enable firms to change the number of goods to supply. It also acts as a signal to the consumer to decide on their demands. The lower the price of a commodity and services the more, the higher the requests from the consumers. When the cost is low, the order will be high, and the producers will be forced to increase the supply (Moran & J.D, 2018).

REFERENCE

Deegen, P. and Halbritter, A., 2018. The fair market allocation of land between forestry and agriculture. Forest Policy and Economics, 97, pp.122-131.

Moran, J.D., 2018. The Impact of Regulatory Measures Imposed on Initial Coin Offerings in the United States Market Economy. Catholic University Journal of Law and Technology, 26(2), p.7.

Rycroft, R.S., 2017. Slicing the Pie in a Nondiscriminatory Pure Market Economy. The Economics of Inequality, Discrimination, Poverty, and Mobility (pp. 125-141). Routledge.

CENTRALLY PLANNED ECONOMY

A centrally planned economy involves an individual or only one group that manages the production. Goods and services that sure prepared by the government are produced by all businesses together. The authority controlling this economy set guidelines to be followed by everyone (Calvo et al.,.1992).

The government should address the issue of scarcity to all its citizen and allocate the limited resources to fulfill the needs of all the people.  The state will provide a choice building hospital instead of recreational centers for the people. Allocation of resources is by centralized planning which is done by the government. The government command and directs the funds to be distributed and used in a certain way. In scarcity, the government imposes a tax to be paid by the people to meet the demands of the people. The government plays a role in coordinating scarce resources in the time of disaster, wars, and crisis. In this situation the choice of the consumer is limited only what is planned to be produced by the government is offered (Wanless & P.T, 2018).

The central planning authority is the one to fix the price of various goods and services in the market. The price should reflect the social preferences of the people. The products are sold in a rate that matches the marginal production cost. If the value of production is below the price of the commodity, there would be profit to the industry. A loss will be incurred when the amount of the product is below the production cost. The government decides on the value of their goods and services depending on one charge of production (Zawalinska et al.,. 2018).

REFERENCE

Calvo, G.A. and Coricelli, F., 1992. Stabilizing a previously centrally planned economy: Poland 1990. Economic Policy, 7(14), pp.175-226.

Wanless, P.T., 2018. Taxation in Centrally Planned Economies. Routledge.

Zawalińska, K., Tran, N. and Płoszaj, A., 2018. R&D in a post-centrally-planned economy: The macroeconomic effects in Poland. Journal of Policy Modeling, 40(1), pp.37-59.

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